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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 10, 1998
Commodore Environmental Services, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-10054 87-0275043
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
150 East 58th Street
New York, New York 10155
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 308-5800
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(Former Name or Former Address, if Changed Since Last Report)
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CURRENT REPORT ON FORM 8-K
COMMODORE ENVIRONMENTAL SERVICES, INC.
February 10, 1998
Item 5. Other Events.
Private Placement
On February 10, 1998, Commodore Environmental Services, Inc., a
Delaware corporation (the "Company"), sold (i) 1,381,692 shares (the "First
Tranche Shares") of common stock, par value $0.001 per share, of the Company's
affiliate Commodore Applied Technologies, Inc. ("Applied Common Stock") and
(ii) three-year warrants ("Warrants") to purchase an aggregate of 150,000
shares of Applied Common Stock at an exercise price equal to $6.00 per share,
for an aggregate purchase price of $6.0 million (the "First Tranche Sale") in
a private placement (the "Private Placement") to certain "accredited
investors" as defined in Rule 501 of the Securities Act of 1933, as amended
(the "Securities Act"). After deduction of fees and transaction costs
associated with the First Tranche Sale totaling approximately $550,000, the
Company received aggregate net proceeds of approximately $5,450,000 from the
First Tranche Sale. The shares of Applied Common Stock issued and to be issued
to the investors in connection with the Private Placement have been and will
be issued from the account of the Company which, immediately prior to the
First Tranche Sale, owned approximately 52% of the outstanding shares of
Applied Common Stock. As of the date of this Current Report, giving effect to
the First Tranche Sale, the Company owned approximately 44% of the outstanding
shares of Applied Common Stock.
Pursuant to the terms of the Private Placement, in the event that 90%
of the average closing bid price per share of Applied Common Stock for the
First Tranche Measuring Period (as defined below) (the "First Tranche
Adjustment Price") is less than the $4.3425 per share purchase price of the
First Tranche Shares, the Company will issue to the investors, for no
additional consideration, an aggregate amount of additional shares of Applied
Common Stock equal to the difference between (a) the amount equal to 6,000,000
divided by the First Tranche Adjustment Price and (b) 1,381,692, provided that
in no event will the First Tranche Adjustment Price be less than $2.00. The
"First Tranche Measuring Period" means the 75-trading day period commencing
immediately following the effective date of a registration statement covering
the First Tranche Shares, provided that if such registration statement is not
declared effective within 12 months following February 10, 1998, the First
Tranche Measuring Period will commence on the date which is 12 months
following February 10, 1998, and provided further that if such registration
statement is declared effective prior to April 15, 1998, the First Tranche
Measuring Period will mean the 75-trading day period commencing April 15,
1998.
The maximum number of additional shares of Applied Common Stock which
the Company may be required to issue in connection with the First Tranche Sale
is 1,618,308 shares, assuming the lowest possible First Tranche Adjustment
Price of $2.00.
The Company will, no earlier than the last day of the First Tranche
Measuring Period and no later than 45 trading days following the end of the
First Tranche Measuring Period, have the right and option (but not the
obligation) to require the investors to purchase (i) an aggregate amount of
additional shares of Applied Common Stock equal to 4,000,000 divided by 90% of
the average closing price per share of Applied Common Stock for the five
trading days immediately prior to the closing date of such sale and (ii)
Warrants to purchase an aggregate of 100,000 shares of Applied Common Stock at
an exercise price per share equal to the greater of $6.00 or 125% of the per
share purchase price of the shares of Applied Common Stock sold pursuant to
(i) above, for an aggregate purchase price of $4.0 million (the "Second
Tranche Sale").
As in the case of the First Tranche Sale, in the event that 90% of
the average closing bid price per share of Applied Common Stock for the Second
Tranche Measuring Period (as defined below) (the "Second Tranche Adjustment
Price") is less than the per share purchase price of the Applied Common Stock
sold pursuant to the Second Tranche Sale, the Company will issue to the
investors, for no additional consideration, an aggregate amount of additional
shares of Applied Common Stock equal to the difference between (a) the amount
equal to 4,000,000 divided by the Second Tranche Adjustment Price and (b) the
number of shares of Applied Common Stock sold pursuant to the Second Tranche
Sale, provided that in no event will the Second Tranche Adjustment Price be
less than $2.00. The "Second Tranche Measuring Period" means the 75-trading
day period commencing immediately following the effective date of a
registration statement covering the shares of Applied Common Stock sold in the
Second Tranche Sale, provided that if such registration statement is not
declared effective within 12 months after the closing date of the Second
Tranche Sale, the Second Tranche Measuring Period will commence on the date
which is 12 months following the closing date of the Second Tranche Sale.
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If during the 90-day period after the end of the First Tranche
Measuring Period the Company sells, or Commodore Applied Technologies, Inc.
("Applied") issues, any shares of Applied Common Stock ("First Future Shares")
at a price per share that is less than the per share purchase price of the
First Tranche Shares or during the 90-day period after the end of the Second
Tranche Measuring Period the Company sells, or Applied issues, any shares of
Applied Common Stock ("Second Future Shares") at a price per share that is
less than the per share purchase price of the Applied Common Stock sold in the
Second Tranche Sale, the Company will issue to the investors, for no
additional consideration, a number of additional shares of Applied Common
Stock equal to (a) with respect to First Future Shares, an amount equal to the
difference between (i) 6,000,000 divided by the price at which the First
Future Shares were sold or issued and (ii) 1,381,692, and (b) with respect to
Second Future Shares, an amount equal to the difference between (i) 4,000,000
divided by the price at which the Second Future Shares were sold or issued and
(ii) the amount equal to the number of shares of Applied Common Stock sold in
the Second Tranche Sale. Notwithstanding the foregoing, the terms "First
Future Shares" and "Second Future Shares" do not include any shares of Applied
Common Stock which may be issued in the future upon conversion or exercise of,
or pursuant to the terms of any agreement entered into by the Company or
Applied in respect of, securities of the Company and/or Applied which have
been issued prior to February 9, 1998.
Applied has agreed to file registration statements (the "Registration
Statements") on Form S-3, or other applicable form of registration statement,
under the Securities Act covering all of the shares of Applied Common Stock
issued and to be issued to the investors in the Private Placement and to keep
such Registration Statements continuously effective under the Securities Act
for a period of two years after their respective effective dates or such
earlier date when all shares covered by the Registration Statements have been
sold or may be sold without volume restrictions under the Securities Act (the
"Effective Period").
Avalon Group, Inc. was retained by the Company as a finder in connection
with the Private Placement and has to date received fees of approximately
$510,000 in connection therewith.
The Private Placement was deemed exempt from registration under the
Securities Act in reliance on Section 4(2) of the Securities Act as a
transaction by an issuer not involving any public offering. The recipients of
the shares of Applied Common Stock in connection with the Private Placement
represented their intent to acquire such securities for investment only and
not with a view to or for sale in connection with any distribution thereof,
and appropriate legends have been and will be affixed to the share
certificates representing the shares of Applied Common Stock received and to
be received by the investors in connection with the Private Placement.
Intercompany Note
Upon receipt of the net proceeds of the Private Placement, the
Company provided a $5,450,000 unsecured loan to Applied, evidenced by
Applied's 8% non-convertible note (the "Intercompany Note"). Pursuant to the
terms of the Intercompany Note, interest on the unpaid principal balance of
the Intercompany Note is payable at the rate of 8% per annum semiannually in
cash. The unpaid principal amount of the Intercompany Note is due and payable,
together with accrued and unpaid interest, on the earlier to occur of (a)
December 31, 1999, or (b) consummation of any public offering or private
placement (other than the Private Placement) of securities of Applied with net
proceeds aggregating in excess of $6.0 million, other than in respect of
working capital financing or secured financing of assets received by Applied
in the ordinary course of business from any bank or other lending institution,
provided that if such funds are raised in a private placement during the
period commencing on February 9, 1998 and ending on the last day of the
Effective Period, then the Intercompany Note will not be payable unless a
Registration Statement has been effective for 75 consecutive days and is
effective on the date of such repayment. Applied will use the net proceeds of
the loan solely for working capital and general corporate purposes and not for
the satisfaction of any portion of Applied debt or to redeem any Applied
equity or equity-equivalent securities.
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In connection with the loan, Applied amended and restated in its
entirety a five-year warrant to purchase 7,500,000 shares of Applied Common
Stock issued to the Company on December 2, 1996 to, among other things, reduce
the exercise price of the warrant from $15.00 per share to $10.00 per share.
In addition, Applied issued to the Company an additional five-year warrant to
purchase 1,500,000 shares of Applied Common Stock at an exercise price of
$10.00 per share.
The information set forth above is qualified in its entirety by
reference to: (a) Common Stock Purchase Agreement, dated as of February 9,
1998, among Commodore Environmental Services, Inc., Commodore Applied
Technologies, Inc., Southbrook International Investments, Ltd., Westover
Investments, L.P., and Montrose Investments, Ltd., filed herewith as Exhibit
99.1; (b) Warrant to purchase 75,000 shares of Applied Common Stock issued to
Southbrook International Investments, Ltd., filed herewith as Exhibit 4.1; (c)
Warrant to purchase 48,750 shares of Applied Common Stock issued to Montrose
Investments, Ltd., filed herewith as Exhibit 4.2; (d) Warrant to purchase
26,250 shares of Applied Common Stock issued to Westover Investments, L.P.,
filed herewith as Exhibit 4.3; (e) Registration Rights Agreement, dated as of
February 9, 1998, among Commodore Environmental Services, Inc., Commodore
Applied Technologies, Inc., Southbrook International Investments, Ltd.,
Westover Investments, L.P., and Montrose Investments, Ltd., filed herewith as
Exhibit 99.2; (f) Escrow Agreement, dated as of February 9, 1998, among
Commodore Environmental Services, Inc., Commodore Applied Technologies, Inc.,
Southbrook International Investments, Ltd., Westover Investments, L.P., and
Montrose Investments, Ltd., filed herewith as Exhibit 99.3; (g) Promissory
Note, dated February 10, 1998, of Commodore Applied Technologies, Inc., filed
herewith as Exhibit 99.4; (h) Warrant to purchase 7,500,000 shares of Applied
Common Stock issued to Commodore Environmental Services, Inc., filed herewith
as Exhibit 4.4; and (i) Warrant to purchase 1,500,000 shares of Applied Common
Stock issued to Commodore Environmental Services, Inc., filed herewith as
Exhibit 4.5.
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
Not Applicable.
(b) Pro Forma Financial Information.
Not Applicable.
(c) Exhibits.
*Exhibit No. Description
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4.1 Warrant to purchase 75,000 shares of Applied Common Stock issued
to Southbrook International Investments, Ltd.
4.2 Warrant to purchase 48,750 shares of Applied Common Stock issued
to Montrose Investments, Ltd.
4.3 Warrant to purchase 26,250 shares of Applied Common Stock issued
to Westover Investments, L.P.
4.4 Warrant to purchase 7,500,000 shares of Applied Common Stock
issued to Commodore Environmental Services, Inc.
4.5 Warrant to purchase 1,500,000 shares of Applied Common Stock
issued to Commodore Environmental Services, Inc.
99.1 Common Stock Purchase Agreement, dated as of February 9, 1998,
among Commodore Environmental Services, Inc., Commodore Applied
Technologies, Inc., Southbrook International Investments, Ltd.,
Westover Investments, L.P., and Montrose Investments, Ltd.
99.2 Registration Rights Agreement, dated as of February 9, 1998, among
Commodore Environmental Services, Inc., Commodore Applied
Technologies, Inc., Southbrook International Investments, Ltd.,
Westover Investments, L.P., and Montrose Investments, Ltd.
99.3 Escrow Agreement, dated as of February 9, 1998, among Commodore
Environmental Services, Inc., Commodore Applied Technologies,
Inc., Southbrook International Investments, Ltd., Westover
Investments, L.P., and Montrose Investments, Ltd.
99.4 Promissory Note, dated February 10, 1998, of Commodore Applied
Technologies, Inc.
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* All Exhibits are filed herewith electronically.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Current Report to be signed on its behalf
by the undersigned thereunto duly authorized.
COMMODORE ENVIRONMENTAL SERVICES, INC.
Date: February 20, 1998 By: /s/ Michael D. Fullwood
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Michael D. Fullwood, Senior Vice President,
Chief Financial and Administrative Officer,
Secretary and General Counsel
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EXHIBIT INDEX
*Exhibit No. Description
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4.1 Warrant to purchase 75,000 shares of Applied Common Stock issued
to Southbrook International Investments, Ltd.
4.2 Warrant to purchase 48,750 shares of Applied Common Stock issued
to Montrose Investments, Ltd.
4.3 Warrant to purchase 26,250 shares of Applied Common Stock issued
to Westover Investments, L.P.
4.4 Warrant to purchase 7,500,000 shares of Applied Common Stock
issued to Commodore Environmental Services, Inc.
4.5 Warrant to purchase 1,500,000 shares of Applied Common Stock
issued to Commodore Environmental Services, Inc.
99.1 Common Stock Purchase Agreement, dated as of February 9, 1998,
among Commodore Environmental Services, Inc., Commodore Applied
Technologies, Inc., Southbrook International Investments, Ltd.,
Westover Investments, L.P., and Montrose Investments, Ltd.
99.2 Registration Rights Agreement, dated as of February 9, 1998, among
Commodore Environmental Services, Inc., Commodore Applied
Technologies, Inc., Southbrook International Investments, Ltd.,
Westover Investments, L.P., and Montrose Investments, Ltd.
99.3 Escrow Agreement, dated as of February 9, 1998, among Commodore
Environmental Services, Inc., Commodore Applied Technologies,
Inc., Southbrook International Investments, Ltd., Westover
Investments, L.P., and Montrose Investments, Ltd.
99.4 Promissory Note, dated February 10, 1998, of Commodore Applied
Technologies, Inc.
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* All Exhibits are filed herewith electronically.
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NEITHER THIS WARRANT NOR THE SECURITIES INTO WHICH THIS WARRANT IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
WARRANT
Warrant No. W-1 Dated February 10, 1998
Commodore Environmental Services, Inc., a corporation organized and
existing under the laws of the State of Delaware ("COES"), hereby certifies
that, for value received, Southbrook International Investments, Ltd., or its
registered assigns ("Holder"), is entitled, subject to the terms set forth
below, to purchase from COES up to a total of 75,000 shares (each such share, a
"Warrant Share" and all such shares, the "Warrant Shares") of common stock,
$.001 par value (the "Common Stock"), of Commodore Applied Technologies, Inc., a
corporation organized and existing under the laws of the State of Delaware (the
"Company"), controlled by COES, at an exercise price equal to $6.00 per share
(as adjusted from time to time as provided in Section 8, the "Exercise Price"),
at any time and from time to time from and after the date hereof and through and
including February 10, 2001 (the "Expiration Date"), and subject to the
following terms and conditions:
1. Registration of Warrant. COES and the Company shall register this
Warrant, upon records to be maintained by COES and the Company for that purpose
(the "Warrant Register"), in the name of the record Holder hereof from time to
time. COES and the Company will deem and treat the registered Holder of this
Warrant as the absolute owner hereof for the purpose of any exercise hereof or
any distribution to the Holder, and for all other purposes, and neither COES nor
the Company shall be affected by notice to the contrary.
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2. Registration of Transfers and Exchanges.
(a) COES shall register the transfer of any portion of this Warrant in the
Warrant Register, upon surrender of this Warrant, with the Form of Assignment
attached hereto duly completed and signed, to COES at the office specified in or
pursuant to Section 3(b). Upon any such registration or transfer, a new warrant
to purchase Common Stock, in substantially the form of this Warrant (any such
new warrant, a "New Warrant"), evidencing the portion of this Warrant so
transferred shall be issued to the transferee and a New Warrant evidencing the
remaining portion of this Warrant not so transferred, if any, shall be issued to
the transferring Holder by COES. The acceptance of the New Warrant by the
transferee thereof shall be deemed the acceptance of such transferee of all of
the rights and obligations of a holder of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof by the Holder
to the office of COES specified in or pursuant to Section 3(b) for one or more
New Warrants, evidencing in the aggregate the right to purchase the number of
Warrant Shares which may then be purchased hereunder. Any such New Warrant will
be dated the date of such exchange.
3. Duration and Exercise of Warrants.
(a) This Warrant shall be exercisable by the registered Holder on any
business day before 5:30 P.M., Eastern Standard Time, at any time and from time
to time on or after the date hereof to and including the Expiration Date. At
5:30 P.M., Eastern Standard Time on the Expiration Date, the portion of this
Warrant not exercised prior thereto shall be and become void and of no value.
This Warrant may not be redeemed by COES.
(b) Subject to Sections 2(b), 6, 9 and 11, upon surrender of this Warrant,
with the Form of Election to Purchase attached hereto duly completed and signed,
to COES at its address for notice set forth in Section 11 and upon payment of
the Exercise Price multiplied by the number of Warrant Shares that the Holder
intends to purchase hereunder, in lawful money of the United States of America,
in cash or by certified or official bank check or checks, all as specified by
the Holder in the Form of Election to Purchase, COES shall promptly (but in no
event later than 3 business days after the Date of Exercise (as defined herein))
issue or cause to be issued and cause to be delivered to or upon the written
order of the Holder and in such name or names as the Holder may designate, a
certificate for the Warrant Shares, free of restrictive legends other than as
required by the Purchase Agreement of even date herewith between the Holder,
COES, the Company and the other purchasers named therein (the "Purchase
Agreement"). Any person so designated by the Holder to receive Warrant Shares
shall be deemed to have become holder of record of such Warrant Shares as of the
Date of Exercise of this Warrant.
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A "Date of Exercise" means the date on which COES shall have received (i)
this Warrant (or any New Warrant, as applicable), with the Form of Election to
Purchase attached hereto (or attached to such New Warrant) appropriately
completed and duly signed, and (ii) payment of the Exercise Price for the number
of Warrant Shares so indicated by the holder hereof to be purchased.
(c) This Warrant shall be exercisable, either in its entirety or, from time
to time, for a portion of the number of Warrant Shares. If less than all of the
Warrant Shares which may be purchased under this Warrant are exercised at any
time, COES shall issue or cause to be issued, at its expense, a New Warrant
evidencing the right to purchase the remaining number of Warrant Shares for
which no exercise has been evidenced by this Warrant.
4. Piggyback Registration Rights. During the term of this Warrant, the
Company may not file any registration statement with the Securities and Exchange
Commission (other than registration statements of the Company filed on Form S-8
or Form S-4, each as promulgated under the Securities Act of 1933, as amended,
pursuant to which the Company is registering securities pursuant to a Company
employee benefit plan or pursuant to a merger, acquisition or similar
transaction including supplements thereto, but not additionally filed
registration statements in respect of such securities) at any time when there is
not an effective registration statement covering the resale of the Warrant
Shares and naming the Holder as a selling stockholder thereunder, unless the
Company provides each of the Holder and Robinson Silverman Pearce Aronsohn &
Berman LLP, attention Eric L. Cohen with not less than 20 days notice of its
intention to file such registration statement and provides the Holder the option
to include any or all of the applicable Warrant Shares therein. The piggyback
registration rights granted to the Holder pursuant to this Section shall
continue until all of the Holder's Warrant Shares have been sold in accordance
with either an effective registration statement or pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended, or upon the expiration
of this Warrant. The Company will pay all registration expenses in connection
therewith.
5. Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder, and the Company shall not be required to issue or cause to be issued
or deliver or cause to be delivered the certificates for Warrant Shares unless
or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid. The Holder shall be
responsible for all other tax liability that may arise as a result of holding or
transferring this Warrant or receiving Warrant Shares upon exercise hereof.
6. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, COES shall issue or cause to be issued in exchange and substitution
for and upon cancellation hereof, or in lieu of and substitution for this
Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to COES of such loss, theft or destruction and
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<PAGE>
indemnity, if reasonably satisfactory to it. Applicants for a New Warrant under
such circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as COES may prescribe.
7. Ownership of Warrant Shares by COES prior to Exercise of Warrant. COES
covenants that it will at all times prior to the complete exercise of the
Warrant own sufficient shares of Common Stock in order to enable it to issue
Warrant Shares upon exercise of this Warrant as herein provided, and the number
of Warrant Shares which are then issuable and deliverable upon the exercise of
this entire Warrant, are free from preemptive rights or any other actual
contingent purchase rights of persons other than the Holder (taking into account
the adjustments and restrictions of Section 8). Each of COES and the Company
covenant that all Warrant Shares that shall be so issuable and deliverable
shall, upon issuance and the payment of the applicable Exercise Price in
accordance with the terms hereof, be duly and validly authorized, issued and
fully paid and nonassessable.
8. Certain Adjustments. The Exercise Price and number of Warrant Shares are
subject to adjustment from time to time as set forth in this Section 8. Upon
each such adjustment of the Exercise Price pursuant to this Section 8, the
Holder shall thereafter prior to the Expiration Date be entitled to purchase, at
the Exercise Price resulting from such adjustment, the number of Warrant Shares
obtained by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Shares issuable upon exercise of this
Warrant immediately prior to such adjustment and dividing the product thereof by
the Exercise Price resulting from such adjustment.
(a) If the Company, at any time while this Warrant is outstanding, (i)
shall pay a stock dividend or otherwise make a distribution or distributions on
shares of its Common Stock or on any other class of capital stock (and not the
Common Stock) payable in shares of Common Stock, other than the dividends
payable under the Purchase Agreement, (ii) subdivide outstanding shares of
Common Stock into a larger number of shares, or (iii) combine outstanding shares
of Common Stock into a smaller number of shares, the Exercise Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding before such event and of which the denominator shall be
the number of shares of Common Stock outstanding after such event. Any
adjustment made pursuant to this Section shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision or combination, and shall apply to
successive subdivisions and combinations.
(b) In case of any reclassification of the Common Stock, any consolidation
or merger of the Company with or into another person, the sale or transfer of
all or substantially all of the assets of the Company in which the consideration
therefor is equity or equity-equivalent securities or any compulsory share
exchange pursuant to which the Common Stock is converted into other securities
or property, then the Holder shall have the right thereafter to exercise this
Warrant only into the shares of stock and other securities and property
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receivable upon or deemed to be held by holders of Common Stock following such
reclassification, consolidation, merger, sale, transfer or share exchange, and
the Holder shall be entitled upon such event to receive such amount of
securities or property of the Company's business combination partner equal to
the amount of Warrant Shares such Holder would have been entitled to had such
Holder exercised this Warrant immediately prior to such reclassification,
consolidation, merger, sale, transfer or share exchange. The terms of any such
consolidation, merger, sale, transfer or share exchange shall include such terms
so as to continue to give to the Holder the right to receive the securities or
property set forth in this Section 8(b) upon any exercise following any such
reclassification, consolidation, merger, sale, transfer or share exchange.
(c) If the Company, at any time while this Warrant is outstanding, shall
distribute to all holders of Common Stock (and not to the Holder) evidences of
its indebtedness or assets or rights or warrants to subscribe for or purchase
any security (excluding those referred to in Sections 8(a), (b) and (d)), then
in each such case the Exercise Price shall be determined by multiplying the
Exercise Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Exercise Price determined as of
the record date mentioned above, and of which the numerator shall be such
Exercise Price on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
a nationally recognized or major regional investment banking firm or firm of
independent certified public accountants of recognized standing (which may be
the firm that regularly examines the financial statements of the Company) (an
"Appraiser") mutually selected in good faith by the holders of a majority in
interest of the Warrants then outstanding and COES. Any determination made by
the Appraiser shall be final.
(d) In the event that at any time or from time to time the Company shall
issue rights, options or warrants entitling the holders thereof to subscribe for
shares of Common Stock, or securities convertible into or exchangeable or
exercisable for Common Stock, in each case, to all holders of Common Stock
(other than in connection with the adoption of a shareholder rights plan by the
Company) without any charge, entitling such holders to subscribe for or purchase
shares of Common Stock at a price per share that as of the record date for such
issuance is less than the Market Price, the number of shares of Common Stock
issuable upon the exercise of each Warrant shall be increased to a number
determined by multiplying the number of shares of Common Stock theretofore
issuable upon exercise of each Warrant by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding on the date of
issuance of such rights, options, warrants or securities plus the number of
additional shares of Common Stock offered for subscription or purchase or into
or for which such securities that are issued are convertible, exchangeable or
exercisable, and the denominator of which shall be the number of shares of
Common Stock outstanding on the date of issuance of such rights, options,
warrants or securities plus the total number of shares of Common Stock which the
aggregate consideration expected to be received by the Company (assuming the
exercise or conversion of all such rights, options, warrants or securities)
would purchase at the
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then Market Price. In the event of any such adjustment, the Exercise Price shall
be adjusted to a number determined by dividing the Exercise Price immediately
prior to such date of issuance by the aforementioned fraction. Such adjustment
shall be made immediately after such rights, options or warrants are issued and
shall become effective, retroactive to the record date for the determination of
stockholders entitled to receive such rights, options, warrants, or securities.
No adjustment shall be made pursuant to this Section 8(d) which shall have the
effect of decreasing the number of shares of Common Stock purchasable upon
exercise of each Warrant or of increasing the Exercise Price.
(e) For the purposes of this Section 8, the following clauses shall also be
applicable:
(i) Record Date. In case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in Common Stock or in
securities convertible or exchangeable into shares of Common Stock, or (B)
to subscribe for or purchase Common Stock or securities convertible or
exchangeable into shares of Common Stock, then such record date shall be
deemed to be the date of the issue or sale of the shares of Common Stock
deemed to have been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(ii) Treasury Shares. The number of shares of Common Stock outstanding
at any given time shall not include shares owned or held by or for the
account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(f) All calculations under this Section 8 shall be made to the nearest cent
or the nearest 1/100th of a share, as the case may be.
(g) If:
(i) the Company shall declare a dividend (or any other distribution)
on its Common Stock; or
(ii) the Company shall declare a special nonrecurring cash dividend
on or a redemption of its Common Stock; or
(iii) the Company shall authorize the granting to all holders of the
Common Stock rights or warrants to subscribe for or purchase any
shares of capital stock of any class or of any rights; or
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<PAGE>
(iv) the approval of any stockholders of the Company shall be required
in connection with any reclassification of the Common Stock of
the Company, any consolidation or merger to which the Company is
a party, any sale or transfer of all or substantially all of the
assets of the Company, or any compulsory share exchange whereby
the Common Stock is converted into other securities, cash or
property; or
(v) the Company shall authorize the voluntary dissolution,
liquidation or winding up of the affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least 20 calendar days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
9. Payment of Exercise Price. The Holder may pay the Exercise Price in one
of the following manners:
(a) Cash Exercise. The Holder shall deliver immediately available
funds to COES; or
(b) Cashless Exercise. The Holder shall surrender this Warrant to COES
together with a notice of cashless exercise, in which event COES shall
issue to the Holder the number of Warrant Shares determined as follows:
X = Y (A-B)/A
where:
X = the number of Warrant Shares to be issued to the Holder.
Y = the number of Warrant Shares with respect to which this
Warrant is being exercised.
-7-
<PAGE>
A = the closing sale prices of the Common Stock for the
Trading Day immediately prior to the Date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date of the Warrant.
10. Fractional Shares. COES shall not be required to issue or cause to be
issued fractional Warrant Shares on the exercise of this Warrant. The number of
full Warrant Shares which shall be issuable upon the exercise of this Warrant
shall be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of this Warrant so presented. If any fraction of a
Warrant Share would, except for the provisions of this Section 10, be issuable
on the exercise of this Warrant, COES shall, at its option, (i) pay an amount in
cash equal to the Exercise Price multiplied by such fraction or (ii) round the
number of Warrant Shares issuable, up to the next whole number.
11. Notices. Any and all notices or other communications or deliveries
hereunder shall be in writing and shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section, (ii) the business day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iii) upon actual receipt by
the party to whom such notice is required to be given. The addresses for such
communications shall be: (i) if to the Company and/or COES, to 150 East 58th
Street, suite 3400, New York, NY 10155, or to Facsimile No.: (212) 753-0731
Attention: Bentley J. Blum and Michael D. Fullwood or (ii) if to the Holder, to
the Holder at the address or facsimile number appearing on the Warrant Register
or such other address or facsimile number as the Holder may provide to the
Company in accordance with this Section 11.
12. Warrant Agent.
(a) COES shall serve as warrant agent under this Warrant. Upon thirty (30)
days' notice to the Holder, the Company may appoint a new warrant agent.
(b) Any corporation into which the Company or any new warrant agent may be
merged or any corporation resulting from any consolidation to which the Company
or any new warrant agent shall be a party or any corporation to which the
Company or any new warrant agent transfers substantially all of its corporate
trust or shareholders services business shall be a successor warrant agent under
this Warrant without any further act. Any such successor warrant agent shall
promptly cause notice of its succession as warrant agent to be mailed (by first
class mail, postage prepaid) to the Holder at the Holder's last address as shown
on the Warrant Register.
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<PAGE>
13. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. This
Warrant may be amended only in writing signed by COES, the Company and the
Holder.
(b) Subject to Section 13(a), above, nothing in this Warrant shall be
construed to give to any person or corporation other than COES, the Company and
the Holder any legal or equitable right, remedy or cause under this Warrant;
this Warrant shall be for the sole and exclusive benefit of COES, the Company
and the Holder.
(c) This Warrant shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York without regard to the
principles of conflicts of law thereof.
(d) The headings herein are for convenience only, do not constitute a part
of this Warrant and shall not be deemed to limit or affect any of the provisions
hereof.
(e) In case any one or more of the provisions of this Warrant shall be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Warrant shall not in any way be affected
or impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
(f) In the event that COES breaches any of its representations under this
Warrant, is otherwise in violation of any provision of this Warrant, or is
unable to carry out any of its obligations under this Warrant, the Company shall
issue a new warrant to the Holder, which new warrant shall be identical to this
Warrant, except all obligations under such new warrant, including, without
limitations, the obligation to reserve and issue fully paid and nonassessable
Warrant Shares shall be borne by the Company.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, each of COES and this Company has caused this Warrant
to be duly executed by its respective authorized officer as of the date first
indicated above.
COMMODORE APPLIED TECHNOLOGIES, INC.
By: /s/ Michael D. Fullwood
--------------------------------------
Name: Michael D. Fullwood
--------------------------------------
Title: Senior Vice President, Chief Financial
and Administrative Officer,
Secretary and General Counsel
COMMODORE ENVIRONMENTAL SERVICES, INC.
By: /s/ Michael D. Fullwood
--------------------------------------
Name: Michael D. Fullwood
--------------------------------------
Title: Senior Vice President, Chief Financial
and Administrative Officer,
Secretary and General Counsel
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To Commodore Environmental Technologies, Inc.:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase [___________]
shares of Common Stock, $.001 par value ("Common Stock"), of Commodore Applied
Technologies, Inc. and, if such Holder is not utilizing the cashless exercise
provisions set forth in this Warrant, encloses herewith $_________ in cash or
certified or official bank check or checks, which sum represents the aggregate
Exercise Price (as defined in the Warrant) for the number of shares of Common
Stock to which this Form of Election to Purchase relates, together with any
applicable taxes payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
______________________________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
If the number of shares of Common Stock issuable upon this exercise shall
not be all of the shares of Common Stock which the undersigned is entitled to
purchase in accordance with the enclosed Warrant, the undersigned requests that
a New Warrant (as defined in the Warrant) evidencing the right to purchase the
shares of Common Stock not issuable pursuant to the exercise evidenced hereby be
issued in the name of and delivered to:
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
Dated: _______, ____ Name of Holder:
(Print)__________________________
(By:)____________________________
(Name:)
(Title:)
(Signature must conform in all respects to name
of holder as specified on the face of the Warrant)
<PAGE>
FORM OF ASSIGNMENT
(To be completed and signed only upon assignment or transfer of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ___________________________________ the right represented by the within
Warrant to purchase ___________ shares of Common Stock, $.001 par value, of
Commodore Applied Technologies, Inc. to which the within Warrant relates and
appoints __________________ attorney to transfer said right on the books
of___________________ with full power of substitution in the premises.
Dated:
__________, ____
_______________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
_______________________________________
Address of Transferee
_______________________________________
_______________________________________
In the presence of:
______________________
<PAGE>
NEITHER THIS WARRANT NOR THE SECURITIES INTO WHICH THIS WARRANT IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
WARRANT
Warrant No. W-3 Dated February 10, 1998
Commodore Environmental Services, Inc., a corporation organized and
existing under the laws of the State of Delaware ("COES"), hereby certifies
that, for value received, Montrose Investments, Ltd., or its registered assigns
("Holder"), is entitled, subject to the terms set forth below, to purchase from
COES up to a total of 48,750 shares (each such share, a "Warrant Share" and all
such shares, the "Warrant Shares") of common stock, $.001 par value (the "Common
Stock"), of Commodore Applied Technologies, Inc., a corporation organized and
existing under the laws of the State of Delaware (the "Company"), controlled by
COES, at an exercise price equal to $6.00 per share (as adjusted from time to
time as provided in Section 8, the "Exercise Price"), at any time and from time
to time from and after the date hereof and through and including February 10,
2001 (the "Expiration Date"), and subject to the following terms and conditions:
1. Registration of Warrant. COES and the Company shall register this
Warrant, upon records to be maintained by COES and the Company for that purpose
(the "Warrant Register"), in the name of the record Holder hereof from time to
time. COES and the Company will deem and treat the registered Holder of this
Warrant as the absolute owner hereof for the purpose of any exercise hereof or
any distribution to the Holder, and for all other purposes, and neither COES nor
the Company shall be affected by notice to the contrary.
<PAGE>
2. Registration of Transfers and Exchanges.
(a) COES shall register the transfer of any portion of this Warrant in the
Warrant Register, upon surrender of this Warrant, with the Form of Assignment
attached hereto duly completed and signed, to COES at the office specified in or
pursuant to Section 3(b). Upon any such registration or transfer, a new warrant
to purchase Common Stock, in substantially the form of this Warrant (any such
new warrant, a "New Warrant"), evidencing the portion of this Warrant so
transferred shall be issued to the transferee and a New Warrant evidencing the
remaining portion of this Warrant not so transferred, if any, shall be issued to
the transferring Holder by COES. The acceptance of the New Warrant by the
transferee thereof shall be deemed the acceptance of such transferee of all of
the rights and obligations of a holder of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof by the Holder
to the office of COES specified in or pursuant to Section 3(b) for one or more
New Warrants, evidencing in the aggregate the right to purchase the number of
Warrant Shares which may then be purchased hereunder. Any such New Warrant will
be dated the date of such exchange.
3. Duration and Exercise of Warrants.
(a) This Warrant shall be exercisable by the registered Holder on any
business day before 5:30 P.M., Eastern Standard Time, at any time and from time
to time on or after the date hereof to and including the Expiration Date. At
5:30 P.M., Eastern Standard Time on the Expiration Date, the portion of this
Warrant not exercised prior thereto shall be and become void and of no value.
This Warrant may not be redeemed by COES.
(b) Subject to Sections 2(b), 6, 9 and 11, upon surrender of this Warrant,
with the Form of Election to Purchase attached hereto duly completed and signed,
to COES at its address for notice set forth in Section 11 and upon payment of
the Exercise Price multiplied by the number of Warrant Shares that the Holder
intends to purchase hereunder, in lawful money of the United States of America,
in cash or by certified or official bank check or checks, all as specified by
the Holder in the Form of Election to Purchase, COES shall promptly (but in no
event later than 3 business days after the Date of Exercise (as defined herein))
issue or cause to be issued and cause to be delivered to or upon the written
order of the Holder and in such name or names as the Holder may designate, a
certificate for the Warrant Shares, free of restrictive legends other than as
required by the Purchase Agreement of even date herewith between the Holder,
COES, the Company and the other purchasers named therein (the "Purchase
Agreement"). Any person so designated by the Holder to receive Warrant Shares
shall be deemed to have become holder of record of such Warrant Shares as of the
Date of Exercise of this Warrant.
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<PAGE>
A "Date of Exercise" means the date on which COES shall have received (i)
this Warrant (or any New Warrant, as applicable), with the Form of Election to
Purchase attached hereto (or attached to such New Warrant) appropriately
completed and duly signed, and (ii) payment of the Exercise Price for the number
of Warrant Shares so indicated by the holder hereof to be purchased.
(c) This Warrant shall be exercisable, either in its entirety or, from time
to time, for a portion of the number of Warrant Shares. If less than all of the
Warrant Shares which may be purchased under this Warrant are exercised at any
time, COES shall issue or cause to be issued, at its expense, a New Warrant
evidencing the right to purchase the remaining number of Warrant Shares for
which no exercise has been evidenced by this Warrant.
4. Piggyback Registration Rights. During the term of this Warrant, the
Company may not file any registration statement with the Securities and Exchange
Commission (other than registration statements of the Company filed on Form S-8
or Form S-4, each as promulgated under the Securities Act of 1933, as amended,
pursuant to which the Company is registering securities pursuant to a Company
employee benefit plan or pursuant to a merger, acquisition or similar
transaction including supplements thereto, but not additionally filed
registration statements in respect of such securities) at any time when there is
not an effective registration statement covering the resale of the Warrant
Shares and naming the Holder as a selling stockholder thereunder, unless the
Company provides each of the Holder and Robinson Silverman Pearce Aronsohn &
Berman LLP, attention Eric L. Cohen with not less than 20 days notice of its
intention to file such registration statement and provides the Holder the option
to include any or all of the applicable Warrant Shares therein. The piggyback
registration rights granted to the Holder pursuant to this Section shall
continue until all of the Holder's Warrant Shares have been sold in accordance
with either an effective registration statement or pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended, or upon the expiration
of this Warrant. The Company will pay all registration expenses in connection
therewith.
5. Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder, and the Company shall not be required to issue or cause to be issued
or deliver or cause to be delivered the certificates for Warrant Shares unless
or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid. The Holder shall be
responsible for all other tax liability that may arise as a result of holding or
transferring this Warrant or receiving Warrant Shares upon exercise hereof.
6. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, COES shall issue or cause to be issued in exchange and substitution
for and upon cancellation hereof, or in lieu of and substitution for this
Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to COES of such loss, theft or destruction and
-3-
<PAGE>
indemnity, if reasonably satisfactory to it. Applicants for a New Warrant under
such circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as COES may prescribe.
7. Ownership of Warrant Shares by COES prior to Exercise of Warrant. COES
covenants that it will at all times prior to the complete exercise of the
Warrant own sufficient shares of Common Stock in order to enable it to issue
Warrant Shares upon exercise of this Warrant as herein provided, and the number
of Warrant Shares which are then issuable and deliverable upon the exercise of
this entire Warrant, are free from preemptive rights or any other actual
contingent purchase rights of persons other than the Holder (taking into account
the adjustments and restrictions of Section 8). Each of COES and the Company
covenant that all Warrant Shares that shall be so issuable and deliverable
shall, upon issuance and the payment of the applicable Exercise Price in
accordance with the terms hereof, be duly and validly authorized, issued and
fully paid and nonassessable.
8. Certain Adjustments. The Exercise Price and number of Warrant Shares are
subject to adjustment from time to time as set forth in this Section 8. Upon
each such adjustment of the Exercise Price pursuant to this Section 8, the
Holder shall thereafter prior to the Expiration Date be entitled to purchase, at
the Exercise Price resulting from such adjustment, the number of Warrant Shares
obtained by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Shares issuable upon exercise of this
Warrant immediately prior to such adjustment and dividing the product thereof by
the Exercise Price resulting from such adjustment.
(a) If the Company, at any time while this Warrant is outstanding, (i)
shall pay a stock dividend or otherwise make a distribution or distributions on
shares of its Common Stock or on any other class of capital stock (and not the
Common Stock) payable in shares of Common Stock, other than the dividends
payable under the Purchase Agreement, (ii) subdivide outstanding shares of
Common Stock into a larger number of shares, or (iii) combine outstanding shares
of Common Stock into a smaller number of shares, the Exercise Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding before such event and of which the denominator shall be
the number of shares of Common Stock outstanding after such event. Any
adjustment made pursuant to this Section shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision or combination, and shall apply to
successive subdivisions and combinations.
(b) In case of any reclassification of the Common Stock, any consolidation
or merger of the Company with or into another person, the sale or transfer of
all or substantially all of the assets of the Company in which the consideration
therefor is equity or equity-equivalent securities or any compulsory share
exchange pursuant to which the Common Stock is converted into other securities
or property, then the Holder shall have the right thereafter to exercise this
Warrant only into the shares of stock and other securities and property
-4-
<PAGE>
receivable upon or deemed to be held by holders of Common Stock following such
reclassification, consolidation, merger, sale, transfer or share exchange, and
the Holder shall be entitled upon such event to receive such amount of
securities or property of the Company's business combination partner equal to
the amount of Warrant Shares such Holder would have been entitled to had such
Holder exercised this Warrant immediately prior to such reclassification,
consolidation, merger, sale, transfer or share exchange. The terms of any such
consolidation, merger, sale, transfer or share exchange shall include such terms
so as to continue to give to the Holder the right to receive the securities or
property set forth in this Section 8(b) upon any exercise following any such
reclassification, consolidation, merger, sale, transfer or share exchange.
(c) If the Company, at any time while this Warrant is outstanding, shall
distribute to all holders of Common Stock (and not to the Holder) evidences of
its indebtedness or assets or rights or warrants to subscribe for or purchase
any security (excluding those referred to in Sections 8(a), (b) and (d)), then
in each such case the Exercise Price shall be determined by multiplying the
Exercise Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Exercise Price determined as of
the record date mentioned above, and of which the numerator shall be such
Exercise Price on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
a nationally recognized or major regional investment banking firm or firm of
independent certified public accountants of recognized standing (which may be
the firm that regularly examines the financial statements of the Company) (an
"Appraiser") mutually selected in good faith by the holders of a majority in
interest of the Warrants then outstanding and COES. Any determination made by
the Appraiser shall be final.
(d) In the event that at any time or from time to time the Company shall
issue rights, options or warrants entitling the holders thereof to subscribe for
shares of Common Stock, or securities convertible into or exchangeable or
exercisable for Common Stock, in each case, to all holders of Common Stock
(other than in connection with the adoption of a shareholder rights plan by the
Company) without any charge, entitling such holders to subscribe for or purchase
shares of Common Stock at a price per share that as of the record date for such
issuance is less than the Market Price, the number of shares of Common Stock
issuable upon the exercise of each Warrant shall be increased to a number
determined by multiplying the number of shares of Common Stock theretofore
issuable upon exercise of each Warrant by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding on the date of
issuance of such rights, options, warrants or securities plus the number of
additional shares of Common Stock offered for subscription or purchase or into
or for which such securities that are issued are convertible, exchangeable or
exercisable, and the denominator of which shall be the number of shares of
Common Stock outstanding on the date of issuance of such rights, options,
warrants or securities plus the total number of shares of Common Stock which the
aggregate consideration expected to be received by the Company (assuming the
exercise or conversion of all such rights, options, warrants or securities)
would purchase at the
-5-
<PAGE>
then Market Price. In the event of any such adjustment, the Exercise Price shall
be adjusted to a number determined by dividing the Exercise Price immediately
prior to such date of issuance by the aforementioned fraction. Such adjustment
shall be made immediately after such rights, options or warrants are issued and
shall become effective, retroactive to the record date for the determination of
stockholders entitled to receive such rights, options, warrants, or securities.
No adjustment shall be made pursuant to this Section 8(d) which shall have the
effect of decreasing the number of shares of Common Stock purchasable upon
exercise of each Warrant or of increasing the Exercise Price.
(e) For the purposes of this Section 8, the following clauses shall also be
applicable:
(i) Record Date. In case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in Common Stock or in
securities convertible or exchangeable into shares of Common Stock, or (B)
to subscribe for or purchase Common Stock or securities convertible or
exchangeable into shares of Common Stock, then such record date shall be
deemed to be the date of the issue or sale of the shares of Common Stock
deemed to have been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(ii) Treasury Shares. The number of shares of Common Stock outstanding
at any given time shall not include shares owned or held by or for the
account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(f) All calculations under this Section 8 shall be made to the nearest cent
or the nearest 1/100th of a share, as the case may be.
(g) If:
(i) the Company shall declare a dividend (or any other distribution)
on its Common Stock; or
(ii) the Company shall declare a special nonrecurring cash dividend
on or a redemption of its Common Stock; or
(iii) the Company shall authorize the granting to all holders of the
Common Stock rights or warrants to subscribe for or purchase any
shares of capital stock of any class or of any rights; or
-6-
<PAGE>
(iv) the approval of any stockholders of the Company shall be
required in connection with any reclassification of the Common
Stock of the Company, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially
all of the assets of the Company, or any compulsory share
exchange whereby the Common Stock is converted into other
securities, cash or property; or
(v) the Company shall authorize the voluntary dissolution,
liquidation or winding up of the affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least 20 calendar days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
9. Payment of Exercise Price. The Holder may pay the Exercise Price in one
of the following manners:
(a) Cash Exercise. The Holder shall deliver immediately available funds to
COES; or
(b) Cashless Exercise. The Holder shall surrender this Warrant to COES
together with a notice of cashless exercise, in which event COES shall issue to
the Holder the number of Warrant Shares determined as follows:
X = Y (A-B)/A
where:
X = the number of Warrant Shares to be issued to the Holder.
Y = the number of Warrant Shares with respect to which this
Warrant is being exercised.
-7-
<PAGE>
A = the closing sale prices of the Common Stock for the Trading
Day immediately prior to the Date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date of the Warrant.
10. Fractional Shares. COES shall not be required to issue or cause to be
issued fractional Warrant Shares on the exercise of this Warrant. The number of
full Warrant Shares which shall be issuable upon the exercise of this Warrant
shall be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of this Warrant so presented. If any fraction of a
Warrant Share would, except for the provisions of this Section 10, be issuable
on the exercise of this Warrant, COES shall, at its option, (i) pay an amount in
cash equal to the Exercise Price multiplied by such fraction or (ii) round the
number of Warrant Shares issuable, up to the next whole number.
11. Notices. Any and all notices or other communications or deliveries
hereunder shall be in writing and shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section, (ii) the business day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iii) upon actual receipt by
the party to whom such notice is required to be given. The addresses for such
communications shall be: (i) if to the Company and/or COES, to 150 East 58th
Street, suite 3400, New York, NY 10155, or to Facsimile No.: (212) 753-0731
Attention: Bentley J. Blum and Michael D. Fullwood or (ii) if to the Holder, to
the Holder at the address or facsimile number appearing on the Warrant Register
or such other address or facsimile number as the Holder may provide to the
Company in accordance with this Section 11.
12. Warrant Agent.
(a) COES shall serve as warrant agent under this Warrant. Upon thirty (30)
days' notice to the Holder, the Company may appoint a new warrant agent.
(b) Any corporation into which the Company or any new warrant agent may be
merged or any corporation resulting from any consolidation to which the Company
or any new warrant agent shall be a party or any corporation to which the
Company or any new warrant agent transfers substantially all of its corporate
trust or shareholders services business shall be a successor warrant agent under
this Warrant without any further act. Any such successor warrant agent shall
promptly cause notice of its succession as warrant agent to be mailed (by first
class mail, postage prepaid) to the Holder at the Holder's last address as shown
on the Warrant Register.
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<PAGE>
13. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. This
Warrant may be amended only in writing signed by COES, the Company and the
Holder.
(b) Subject to Section 13(a), above, nothing in this Warrant shall be
construed to give to any person or corporation other than COES, the Company and
the Holder any legal or equitable right, remedy or cause under this Warrant;
this Warrant shall be for the sole and exclusive benefit of COES, the Company
and the Holder.
(c) This Warrant shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York without regard to the
principles of conflicts of law thereof.
(d) The headings herein are for convenience only, do not constitute a part
of this Warrant and shall not be deemed to limit or affect any of the provisions
hereof.
(e) In case any one or more of the provisions of this Warrant shall be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Warrant shall not in any way be affected
or impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
(f) In the event that COES breaches any of its representations under this
Warrant, is otherwise in violation of any provision of this Warrant, or is
unable to carry out any of its obligations under this Warrant, the Company shall
issue a new warrant to the Holder, which new warrant shall be identical to this
Warrant, except all obligations under such new warrant, including, without
limitations, the obligation to reserve and issue fully paid and nonassessable
Warrant Shares shall be borne by the Company.
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[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, each of COES and the Company has caused this Warrant to
be duly executed by its respective authorized officer as of the date first
indicated above.
COMMODORE APPLIED TECHNOLOGIES, INC.
By: /s/ Paul E. Hannesson
----------------------------------
Name: Paul E. Hannesson
Title: President and Chief Executive
Officer
COMMODORE ENVIRONMENTAL SERVICES, INC.
By: /s/ Michael D. Fullwood
----------------------------------
Name: Michael D. Fullwood
Title: Senior Vice President, Chief
Financial and Administrative
Officer, Secretary and
General Counsel
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To Commodore Environmental Technologies, Inc.:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase [_________]
shares of Common Stock, $.001 par value ("Common Stock"), of Commodore Applied
Technologies, Inc. and, if such Holder is not utilizing the cashless exercise
provisions set forth in this Warrant, encloses herewith $_________ in cash or
certified or official bank check or checks, which sum represents the aggregate
Exercise Price (as defined in the Warrant) for the number of shares of Common
Stock to which this Form of Election to Purchase relates, together with any
applicable taxes payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
________________________________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
If the number of shares of Common Stock issuable upon this exercise shall
not be all of the shares of Common Stock which the undersigned is entitled to
purchase in accordance with the enclosed Warrant, the undersigned requests that
a New Warrant (as defined in the Warrant) evidencing the right to purchase the
shares of Common Stock not issuable pursuant to the exercise evidenced hereby be
issued in the name of and delivered to:
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
Dated: __________, ____ Name of Holder:
(Print)_________________________________
(By:)___________________________________
(Name:)
(Title:)
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
<PAGE>
FORM OF ASSIGNMENT
(To be completed and signed only upon assignment or transfer of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ___________________________________ the right represented by the within
Warrant to purchase ___________ shares of Common Stock, $.001 par value, of
Commodore Applied Technologies, Inc. to which the within Warrant relates and
appoints _________________ attorney to transfer said right on the books
of___________________ with full power of substitution in the premises.
Dated:
__________, ____
__________________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
________________________________________
Address of Transferee
________________________________________
________________________________________
In the presence of:
__________________________
<PAGE>
NEITHER THIS WARRANT NOR THE SECURITIES INTO WHICH THIS WARRANT IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
WARRANT
Warrant No. W-2 Dated February 10, 1998
Commodore Environmental Services, Inc., a corporation organized and
existing under the laws of the State of Delaware ("COES"), hereby certifies
that, for value received, Westover Investments, L.P., or its registered assigns
("Holder"), is entitled, subject to the terms set forth below, to purchase from
COES up to a total of 26,250 shares (each such share, a "Warrant Share" and all
such shares, the "Warrant Shares") of common stock, $.001 par value (the "Common
Stock"), of Commodore Applied Technologies, Inc., a corporation organized and
existing under the laws of the State of Delaware (the "Company"), controlled by
COES, at an exercise price equal to $6.00 per share (as adjusted from time to
time as provided in Section 8, the "Exercise Price"), at any time and from time
to time from and after the date hereof and through and including February 10,
2001 (the "Expiration Date"), and subject to the following terms and conditions:
1. Registration of Warrant. COES and the Company shall register this
Warrant, upon records to be maintained by COES and the Company for that purpose
(the "Warrant Register"), in the name of the record Holder hereof from time to
time. COES and the Company will deem and treat the registered Holder of this
Warrant as the absolute owner hereof for the purpose of any exercise hereof or
any distribution to the Holder, and for all other purposes, and neither COES nor
the Company shall be affected by notice to the contrary.
<PAGE>
2. Registration of Transfers and Exchanges.
(a) COES shall register the transfer of any portion of this Warrant in the
Warrant Register, upon surrender of this Warrant, with the Form of Assignment
attached hereto duly completed and signed, to COES at the office specified in or
pursuant to Section 3(b). Upon any such registration or transfer, a new warrant
to purchase Common Stock, in substantially the form of this Warrant (any such
new warrant, a "New Warrant"), evidencing the portion of this Warrant so
transferred shall be issued to the transferee and a New Warrant evidencing the
remaining portion of this Warrant not so transferred, if any, shall be issued to
the transferring Holder by COES. The acceptance of the New Warrant by the
transferee thereof shall be deemed the acceptance of such transferee of all of
the rights and obligations of a holder of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof by the Holder
to the office of COES specified in or pursuant to Section 3(b) for one or more
New Warrants, evidencing in the aggregate the right to purchase the number of
Warrant Shares which may then be purchased hereunder. Any such New Warrant will
be dated the date of such exchange.
3. Duration and Exercise of Warrants.
(a) This Warrant shall be exercisable by the registered Holder on any
business day before 5:30 P.M., Eastern Standard Time, at any time and from time
to time on or after the date hereof to and including the Expiration Date. At
5:30 P.M., Eastern Standard Time on the Expiration Date, the portion of this
Warrant not exercised prior thereto shall be and become void and of no value.
This Warrant may not be redeemed by COES.
(b) Subject to Sections 2(b), 6, 9 and 11, upon surrender of this Warrant,
with the Form of Election to Purchase attached hereto duly completed and signed,
to COES at its address for notice set forth in Section 11 and upon payment of
the Exercise Price multiplied by the number of Warrant Shares that the Holder
intends to purchase hereunder, in lawful money of the United States of America,
in cash or by certified or official bank check or checks, all as specified by
the Holder in the Form of Election to Purchase, COES shall promptly (but in no
event later than 3 business days after the Date of Exercise (as defined herein))
issue or cause to be issued and cause to be delivered to or upon the written
order of the Holder and in such name or names as the Holder may designate, a
certificate for the Warrant Shares, free of restrictive legends other than as
required by the Purchase Agreement of even date herewith between the Holder,
COES, the Company and the other purchasers named therein (the "Purchase
Agreement"). Any person so designated by the Holder to receive Warrant Shares
shall be deemed to have become holder of record of such Warrant Shares as of the
Date of Exercise of this Warrant.
-2-
<PAGE>
A "Date of Exercise" means the date on which COES shall have received (i)
this Warrant (or any New Warrant, as applicable), with the Form of Election to
Purchase attached hereto (or attached to such New Warrant) appropriately
completed and duly signed, and (ii) payment of the Exercise Price for the number
of Warrant Shares so indicated by the holder hereof to be purchased.
(c) This Warrant shall be exercisable, either in its entirety or, from time
to time, for a portion of the number of Warrant Shares. If less than all of the
Warrant Shares which may be purchased under this Warrant are exercised at any
time, COES shall issue or cause to be issued, at its expense, a New Warrant
evidencing the right to purchase the remaining number of Warrant Shares for
which no exercise has been evidenced by this Warrant.
4. Piggyback Registration Rights. During the term of this Warrant, the
Company may not file any registration statement with the Securities and Exchange
Commission (other than registration statements of the Company filed on Form S-8
or Form S-4, each as promulgated under the Securities Act of 1933, as amended,
pursuant to which the Company is registering securities pursuant to a Company
employee benefit plan or pursuant to a merger, acquisition or similar
transaction including supplements thereto, but not additionally filed
registration statements in respect of such securities) at any time when there is
not an effective registration statement covering the resale of the Warrant
Shares and naming the Holder as a selling stockholder thereunder, unless the
Company provides each of the Holder and Robinson Silverman Pearce Aronsohn &
Berman LLP, attention Eric L. Cohen with not less than 20 days notice of its
intention to file such registration statement and provides the Holder the option
to include any or all of the applicable Warrant Shares therein. The piggyback
registration rights granted to the Holder pursuant to this Section shall
continue until all of the Holder's Warrant Shares have been sold in accordance
with either an effective registration statement or pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended, or upon the expiration
of this Warrant. The Company will pay all registration expenses in connection
therewith.
5. Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder, and the Company shall not be required to issue or cause to be issued
or deliver or cause to be delivered the certificates for Warrant Shares unless
or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid. The Holder shall be
responsible for all other tax liability that may arise as a result of holding or
transferring this Warrant or receiving Warrant Shares upon exercise hereof.
6. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, COES shall issue or cause to be issued in exchange and substitution
for and upon cancellation hereof, or in lieu of and substitution for this
Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to COES of such loss, theft or destruction and
-3-
<PAGE>
indemnity, if reasonably satisfactory to it. Applicants for a New Warrant under
such circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as COES may prescribe.
7. Ownership of Warrant Shares by COES prior to Exercise of Warrant. COES
covenants that it will at all times prior to the complete exercise of the
Warrant own sufficient shares of Common Stock in order to enable it to issue
Warrant Shares upon exercise of this Warrant as herein provided, and the number
of Warrant Shares which are then issuable and deliverable upon the exercise of
this entire Warrant, are free from preemptive rights or any other actual
contingent purchase rights of persons other than the Holder (taking into account
the adjustments and restrictions of Section 8). Each of COES and the Company
covenant that all Warrant Shares that shall be so issuable and deliverable
shall, upon issuance and the payment of the applicable Exercise Price in
accordance with the terms hereof, be duly and validly authorized, issued and
fully paid and nonassessable.
8. Certain Adjustments. The Exercise Price and number of Warrant Shares are
subject to adjustment from time to time as set forth in this Section 8. Upon
each such adjustment of the Exercise Price pursuant to this Section 8, the
Holder shall thereafter prior to the Expiration Date be entitled to purchase, at
the Exercise Price resulting from such adjustment, the number of Warrant Shares
obtained by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Shares issuable upon exercise of this
Warrant immediately prior to such adjustment and dividing the product thereof by
the Exercise Price resulting from such adjustment.
(a) If the Company, at any time while this Warrant is outstanding, (i)
shall pay a stock dividend or otherwise make a distribution or distributions on
shares of its Common Stock or on any other class of capital stock (and not the
Common Stock) payable in shares of Common Stock, other than the dividends
payable under the Purchase Agreement, (ii) subdivide outstanding shares of
Common Stock into a larger number of shares, or (iii) combine outstanding shares
of Common Stock into a smaller number of shares, the Exercise Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding before such event and of which the denominator shall be
the number of shares of Common Stock outstanding after such event. Any
adjustment made pursuant to this Section shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision or combination, and shall apply to
successive subdivisions and combinations.
(b) In case of any reclassification of the Common Stock, any consolidation
or merger of the Company with or into another person, the sale or transfer of
all or substantially all of the assets of the Company in which the consideration
therefor is equity or equity-equivalent securities or any compulsory share
exchange pursuant to which the Common Stock is converted into other securities
or property, then the Holder shall have the right thereafter to exercise this
Warrant only into the shares of stock and other securities and property
-4-
<PAGE>
receivable upon or deemed to be held by holders of Common Stock following such
reclassification, consolidation, merger, sale, transfer or share exchange, and
the Holder shall be entitled upon such event to receive such amount of
securities or property of the Company's business combination partner equal to
the amount of Warrant Shares such Holder would have been entitled to had such
Holder exercised this Warrant immediately prior to such reclassification,
consolidation, merger, sale, transfer or share exchange. The terms of any such
consolidation, merger, sale, transfer or share exchange shall include such terms
so as to continue to give to the Holder the right to receive the securities or
property set forth in this Section 8(b) upon any exercise following any such
reclassification, consolidation, merger, sale, transfer or share exchange.
(c) If the Company, at any time while this Warrant is outstanding, shall
distribute to all holders of Common Stock (and not to the Holder) evidences of
its indebtedness or assets or rights or warrants to subscribe for or purchase
any security (excluding those referred to in Sections 8(a), (b) and (d)), then
in each such case the Exercise Price shall be determined by multiplying the
Exercise Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Exercise Price determined as of
the record date mentioned above, and of which the numerator shall be such
Exercise Price on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
a nationally recognized or major regional investment banking firm or firm of
independent certified public accountants of recognized standing (which may be
the firm that regularly examines the financial statements of the Company) (an
"Appraiser") mutually selected in good faith by the holders of a majority in
interest of the Warrants then outstanding and COES. Any determination made by
the Appraiser shall be final.
(d) In the event that at any time or from time to time the Company shall
issue rights, options or warrants entitling the holders thereof to subscribe for
shares of Common Stock, or securities convertible into or exchangeable or
exercisable for Common Stock, in each case, to all holders of Common Stock
(other than in connection with the adoption of a shareholder rights plan by the
Company) without any charge, entitling such holders to subscribe for or purchase
shares of Common Stock at a price per share that as of the record date for such
issuance is less than the Market Price, the number of shares of Common Stock
issuable upon the exercise of each Warrant shall be increased to a number
determined by multiplying the number of shares of Common Stock theretofore
issuable upon exercise of each Warrant by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding on the date of
issuance of such rights, options, warrants or securities plus the number of
additional shares of Common Stock offered for subscription or purchase or into
or for which such securities that are issued are convertible, exchangeable or
exercisable, and the denominator of which shall be the number of shares of
Common Stock outstanding on the date of issuance of such rights, options,
warrants or securities plus the total number of shares of Common Stock which the
aggregate consideration expected to be received by the Company (assuming the
exercise or conversion of all such rights, options, warrants or securities)
would purchase at the
-5-
<PAGE>
then Market Price. In the event of any such adjustment, the Exercise Price shall
be adjusted to a number determined by dividing the Exercise Price immediately
prior to such date of issuance by the aforementioned fraction. Such adjustment
shall be made immediately after such rights, options or warrants are issued and
shall become effective, retroactive to the record date for the determination of
stockholders entitled to receive such rights, options, warrants, or securities.
No adjustment shall be made pursuant to this Section 8(d) which shall have the
effect of decreasing the number of shares of Common Stock purchasable upon
exercise of each Warrant or of increasing the Exercise Price.
(e) For the purposes of this Section 8, the following clauses shall also be
applicable:
(i) Record Date. In case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in Common Stock or in
securities convertible or exchangeable into shares of Common Stock, or (B)
to subscribe for or purchase Common Stock or securities convertible or
exchangeable into shares of Common Stock, then such record date shall be
deemed to be the date of the issue or sale of the shares of Common Stock
deemed to have been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(ii) Treasury Shares. The number of shares of Common Stock outstanding
at any given time shall not include shares owned or held by or for the
account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(f) All calculations under this Section 8 shall be made to the nearest cent
or the nearest 1/100th of a share, as the case may be.
(g) If:
(i) the Company shall declare a dividend (or any other distribution)
on its Common Stock; or
(ii) the Company shall declare a special nonrecurring cash dividend on
or a redemption of its Common Stock; or
(iii) the Company shall authorize the granting to all holders of the
Common Stock rights or warrants to subscribe for or purchase any
shares of capital stock of any class or of any rights; or
-6-
<PAGE>
(iv) the approval of any stockholders of the Company shall be required
in connection with any reclassification of the Common Stock of
the Company, any consolidation or merger to which the Company is
a party, any sale or transfer of all or substantially all of the
assets of the Company, or any compulsory share exchange whereby
the Common Stock is converted into other securities, cash or
property; or
(v) the Company shall authorize the voluntary dissolution,
liquidation or winding up of the affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least 20 calendar days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
9. Payment of Exercise Price. The Holder may pay the Exercise Price in one
of the following manners:
(a) Cash Exercise. The Holder shall deliver immediately available
funds to COES; or
(b) Cashless Exercise. The Holder shall surrender this Warrant to COES
together with a notice of cashless exercise, in which event COES shall
issue to the Holder the number of Warrant Shares determined as follows:
X = Y(A-B)/A
where:
X = the number of Warrant Shares to be issued to the Holder.
Y = the number of Warrant Shares with respect to which this
Warrant is being exercised.
-7-
<PAGE>
A = the closing sale prices of the Common Stock for the Trading
Day immediately prior to the Date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date of the Warrant.
10. Fractional Shares. COES shall not be required to issue or cause to be
issued fractional Warrant Shares on the exercise of this Warrant. The number of
full Warrant Shares which shall be issuable upon the exercise of this Warrant
shall be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of this Warrant so presented. If any fraction of a
Warrant Share would, except for the provisions of this Section 10, be issuable
on the exercise of this Warrant, COES shall, at its option, (i) pay an amount in
cash equal to the Exercise Price multiplied by such fraction or (ii) round the
number of Warrant Shares issuable, up to the next whole number.
11. Notices. Any and all notices or other communications or deliveries
hereunder shall be in writing and shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section, (ii) the business day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iii) upon actual receipt by
the party to whom such notice is required to be given. The addresses for such
communications shall be: (i) if to the Company and/or COES, to 150 East 58th
Street, suite 3400, New York, NY 10155, or to Facsimile No.: (212) 753-0731
Attention: Bentley J. Blum and Michael D. Fullwood or (ii) if to the Holder, to
the Holder at the address or facsimile number appearing on the Warrant Register
or such other address or facsimile number as the Holder may provide to the
Company in accordance with this Section 11.
12. Warrant Agent.
(a) COES shall serve as warrant agent under this Warrant. Upon thirty (30)
days' notice to the Holder, the Company may appoint a new warrant agent.
(b) Any corporation into which the Company or any new warrant agent may be
merged or any corporation resulting from any consolidation to which the Company
or any new warrant agent shall be a party or any corporation to which the
Company or any new warrant agent transfers substantially all of its corporate
trust or shareholders services business shall be a successor warrant agent under
this Warrant without any further act. Any such successor warrant agent shall
promptly cause notice of its succession as warrant agent to be mailed (by first
class mail, postage prepaid) to the Holder at the Holder's last address as shown
on the Warrant Register.
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<PAGE>
13. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. This
Warrant may be amended only in writing signed by COES, the Company and the
Holder.
(b) Subject to Section 13(a), above, nothing in this Warrant shall be
construed to give to any person or corporation other than COES, the Company and
the Holder any legal or equitable right, remedy or cause under this Warrant;
this Warrant shall be for the sole and exclusive benefit of COES, the Company
and the Holder.
(c) This Warrant shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York without regard to the
principles of conflicts of law thereof.
(d) The headings herein are for convenience only, do not constitute a part
of this Warrant and shall not be deemed to limit or affect any of the provisions
hereof.
(e) In case any one or more of the provisions of this Warrant shall be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Warrant shall not in any way be affected
or impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
(f) In the event that COES breaches any of its representations under this
Warrant, is otherwise in violation of any provision of this Warrant, or is
unable to carry out any of its obligations under this Warrant, the Company shall
issue a new warrant to the Holder, which new warrant shall be identical to this
Warrant, except all obligations under such new warrant, including, without
limitations, the obligation to reserve and issue fully paid and nonassessable
Warrant Shares shall be borne by the Company.
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[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, each of COES and the Company has caused this Warrant to
be duly executed by its respective authorized officer as of the date first
indicated above.
COMMODORE APPLIED TECHNOLOGIES, INC.
By: /s/ Michael D. Fullwood
---------------------------
Name: Michael D. Fullwood
-------------------------
Title: Senior Vice Prsident, Chief Financial
and Administrative Officer, Secretary
l and General Counsel
COMMODORE ENVIRONMENTAL SERVICES, INC.
By: /s/ Michael D. Fullwood
---------------------------
Name: Michael D. Fullwood
-------------------------
Title: Senior Vice President, Chief Financial
and Administrative Officer, Secretary
and General Counsel
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To Commodore Environmental Technologies, Inc.:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase [_________]
shares of Common Stock, $.001 par value ("Common Stock"), of Commodore Applied
Technologies, Inc. and, if such Holder is not utilizing the cashless exercise
provisions set forth in this Warrant, encloses herewith $_________ in cash or
certified or official bank check or checks, which sum represents the aggregate
Exercise Price (as defined in the Warrant) for the number of shares of Common
Stock to which this Form of Election to Purchase relates, together with any
applicable taxes payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR TAX
IDENTIFICATION NUMBER
Dated: __________________, ____ _____________________________________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
If the number of shares of Common Stock issuable upon this exercise shall
not be all of the shares of Common Stock which the undersigned is entitled to
purchase in accordance with the enclosed Warrant, the undersigned requests that
a New Warrant (as defined in the Warrant) evidencing the right to purchase the
shares of Common Stock not issuable pursuant to the exercise evidenced hereby be
issued in the name of and delivered to:
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
Dated: __________________, ____ Name of Holder:
(Print)______________________________________
(By:)________________________________________
(Name:)
(Title:)
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
<PAGE>
FORM OF ASSIGNMENT
(To be completed and signed only upon assignment or transfer of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ___________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock, $ .001 par value, of
Commodore Applied Technologies, Inc. to which the within Warrant relates and
appoints _________________ attorney to transfer said right on the books
of___________________ with full power of substitution in the premises.
Dated:
__________________, ____
_____________________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant)
_____________________________________________
Address of Transferee
_____________________________________________
_____________________________________________
In the presence of:
_____________________________
<PAGE>
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR THE
SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER THE
WARRANTS NOR SUCH SHARES MAY BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT, OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
COMMODORE APPLIED TECHNOLOGIES, INC.
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
No. 2 7,500,000 Shares
THIS CERTIFIES that, for value received, Commodore Environmental Services,
Inc. (the "Holder"), is entitled to subscribe for and purchase from Commodore
Applied Technologies, Inc., a Delaware corporation (the "Company"), subject to
compliance with any applicable stockholder approval or notice requirements, and
upon the terms and conditions set forth herein, at any time or from time to time
after the date hereof, and before 5:00 P.M. on December 1, 2003, New York time
(the "Exercise Period"), Seven Million Five Hundred Thousand (7,500,000) shares,
par value $.001 per share, of the Company ("Common Stock"), at an exercise price
of $10.00 per share (the "Exercise Price"). This Warrant, is being issued in
partial consideration of the Holder's loan of $5.45 million to the Company and
amends and restates in its entirety, a warrant, dated December 2, 1996 issued in
connection with the sale of 100% of the capital stock of Commodore Separation
Technologies, Inc. and Commodore CFC Technologies, Inc. by the Holder to the
Company pursuant to a Stock Purchase Agreement, dated as of December 1, 1996, by
and between the Holder and the Company. As used herein the term "this Warrant"
shall mean and include this Warrant and any Warrant or Warrants hereafter issued
as a consequence of the exercise or transfer of this Warrant in whole or in
part.
The number of shares of Common Stock issuable upon exercise of the Warrants
(the "Warrant Shares") and the Exercise Price may be adjusted from time to time
as hereinafter set forth.
1. This Warrant may be exercised during the Exercise Period, as to the
whole or any lesser number of the respective whole Warrant Shares, as follows:
(a) by the surrender of this Warrant (with the form of election at the
end hereof duly executed) to the Company at its office as set forth in the
form of election attached hereto, or at such other place as is designated in
writing by the Company, together with a certified or bank cashier's check
payable to the order of the Company in an amount equal to the Exercise Price
multiplied by the number of respective Warrant Shares for which this Warrant
is being exercised; or
(b) by surrender of this Warrant (with the notice of cashless exercise
at the end hereof duly executed) to the Company at its office as set forth in
the notice of cashless exercise attached hereto, or at such other place as is
designated in writing by the Company, in which event the Company shall issue
to the Holder the number of Warrant Shares determined as follows:
X = Y(A-B)/A
where:
X = the number of Warrant Shares to be issued to the Holder.
Y = the number of Warrant Shares with respect to which this Warrant
is being exercised.
A = the closing sale price of the Common Stock for the trading day
immediately prior to the date of exercise.
B = the Exercise Price.
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<PAGE>
2. Upon each exercise of the Holder's rights to purchase Warrant Shares,
either pursuant to Section 1(a) or (b) above, the Holder shall be deemed to be
the holder of record of the Warrant Shares issuable upon such exercise,
notwithstanding that the transfer books of the Company shall then be closed or
certificates representing such Warrant Shares shall not then have been
actually delivered to the Holder. For purposes of Rule 144 promulgated under
the Securities Act of 1933, as amended (the "Act"), it is intended, understood
and acknowledged that the Warrant Shares issued in a cashless exercise
transaction pursuant to Section 1(b) above shall be deemed to have been
acquired by the Holder, and the holding period for the Warrant Shares shall be
deemed to have been commenced, on the issue date of the Warrant. As soon as
practicable after each such exercise of this Warrant and payment of the Holder
a certificate or certificates for the Warrant Shares issuable upon such
exercise, registered in the name of the Holder or its designee. If the Warrant
should be exercised in part only, the Company shall, upon surrender of this
Warrant for cancellation, execute and deliver a new Warrant evidencing the
right of the Holder to purchase the balance of the Warrant Shares (or portions
thereof) subject to purchase hereunder.
3. Any Warrants issued upon the transfer or exercise in part of this
Warrant shall be numbered and shall be registered in a Warrant Register as they
are issued. The Company shall be entitled to treat the registered holder of any
Warrant on the Warrant Register as the Owner in fact thereof for all purposes
and shall not be bound to recognize any equitable or other claim to or interest
in such Warrant on the part of any other person, and shall not be liable for any
registration or transfer of Warrants which are registered or to be registered in
the name of a fiduciary or the nominee of a fiduciary unless made with the
actual knowledge that a fiduciary or nominee is committing a breach of trust in
requesting such registration or transfer, or with the knowledge of such facts
that its participation therein amounts to bad faith. This Warrant shall be
transferable only on the books of the Company upon delivery thereof duly
endorsed by the Holder or by his duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment, or authority to
transfer. In all cases or transfer by an attorney, executor, administrator,
guardian, or other legal representative, duly authenticated evidence of his or
its authority shall be produced. Upon any registration of transfer, the Company
shall deliver a new Warrant or Warrants to the person entitled thereto. This
Warrant may be exchanged, at the option of the Holder thereof, for another
Warrant, or other Warrants of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of Warrant
Shares (or portions thereof), upon surrender to the Company or its duly
authorized agent. Notwithstanding the foregoing, the Company shall have no
obligation to cause Warrants to be transferred on its books to any person if, in
the opinion of counsel to the Company, such transfer does not comply with the
provisions of the Act and the rules and regulations thereunder.
4. The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of the rights to purchase all Warrant Shares granted pursuant to
the Warrants, such number of shares of Common Stock as shall, from time to time,
be sufficient therefor. The Company covenants that all shares of Common Stock
issuable upon exercise of this Warrant, upon receipt by the
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<PAGE>
Company of the full Exercise Price therefor if such exercise is pursuant to
Section 1(a) above, or upon receipt by the Company of the notice of cashless
exercise duly executed if such exercise is pursuant to Section 1(b) above,
shall be validly issued, fully paid, nonassessable, and free of preemptive
rights.
5. (a) In case the Company shall at any time after the date the Warrants
were first issued (i) declare a dividend on the outstanding Common Stock payable
in shares of its capital stock, (ii) subdivide the outstanding Common Stock,
(iii) combine the outstanding Common Stock into a smaller number of shares, or
(iv) issue any shares of its capital stock by reclassification of the Common
Stock (including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation), then, in each case,
the Exercise Price, and the number of Warrant Shares issuable upon exercise of
this Warrant, in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination, or reclassification, shall
be proportionately adjusted so that the Holder after such time shall be entitled
to receive the aggregate number and kind of shares which, if such Warrant had
been exercised immediately prior to such time, he would have owned upon such
exercise and been entitled to receive by virtue of such dividend, subdivision,
combination, or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) In case the Company shall issue or fix a record date for the issuance
to all holders of Common Stock of rights, options, or warrants to subscribe for
or purchase Common Stock (or securities convertible into or exchangeable for
Common Stock) at a price per share (or having a conversion or exchange price per
share, if a security convertible into or exchangeable for Common Stock) less
than the Exercise Price per share of Common Stock on such record date, then, in
each case, the Exercise Price shall be adjusted by multiplying the Exercise
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding on
such record date plus the number of shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock so to be offered
(or the aggregate initial conversion or exchange price of the convertible or
exchangeable securities so to be offered) would purchase at such current
Exercise Price and the denominator of which shall be the number of shares of
Common Stock outstanding on such record date plus the number of additional
shares of Common Stock to be offered for subscription or purchase (or into which
the convertible or exchangeable securities so to be offered are initially
convertible or exchangeable). Such adjustment shall become effective at the
close of business on such record date; provided, however, that, to the extent
the shares of Common Stock (or securities convertible into or exchangeable for
shares of Common Stock) are not delivered, the Exercise Price shall be
readjusted after the expiration of such rights, options, or warrants (but only
with respect to Warrants exercised after such expiration), to the Exercise Price
which would then be in effect had the adjustments made upon the issuance of such
rights, options, or warrants been made upon the basis of delivery of only the
number of shares of Common Stock (or securities convertible into or exchangeable
for shares of Common Stock) actually issued. In case any subscription price may
be paid in a consideration part or all of which shall be in a form other than
cash, the value of such consideration shall be as determined in good faith by
the board of directors of the Company, whose determination shall be conclusive
absent manifest error. Shares
3
<PAGE>
of Common Stock owned by or held for the account of the Company or any
majority-owned subsidiary shall not be deemed outstanding for the purpose of any
such computation.
(c) In case the Company shall distribute to all holders of Common Stock
(including any such distribution made to the stockholders of the Company in
connection with a consolidation or merger in which the Company is the continuing
corporation) evidences of its indebtedness or assets (other than cash dividends
or distributions and dividends payable in shares of Common Stock), or rights,
options, or warrants to subscribe for or purchase Common Stock, or securities
convertible into or exchangeable for shares of Common Stock (excluding those
with respect to the issuance of which an adjustment of the Exercise Price is
provided pursuant to Section 5(b) hereof), then, in each case, the Exercise
Price shall be adjusted by multiplying the Exercise Price in effect immediately
prior to the record date for the determination of stockholders entitled to
receive such distribution by a fraction, the numerator of which shall be the
Exercise Price per share of Common Stock on such record date, less the fair
market value (as determined in good faith by the board of directors of the
Company, whose determination shall be conclusive absent manifest error) of the
portion of the evidences of indebtedness or assets so to be distributed, or of
such rights, options, or warrants or convertible or exchangeable securities,
applicable to one share, and the denominator of which shall be such current
Exercise Price per share of Common Stock. Such adjustment shall be made whenever
any such distribution is made, and shall become effective on the record date for
the determination of shareholders entitled to receive such distribution.
(d) In case the Company shall issue shares of Common Stock or rights,
options, or warrants to subscribe for or purchase Common Stock, or securities
convertible into or exchangeable for Common Stock (excluding shares, rights,
options, warrants, or convertible or exchangeable securities issued or issuable
(i) in any of the transactions with respect to which an adjustment of the
Exercise Price is provided pursuant to Sections 5(a), 5(b) or 5(c) above, (ii)
upon exercise of the Warrants or (iii) to management or employees of the Company
up to a maximum amount of shares of Common Stock), at a price per share
(determined, in the case of such rights, options, warrants, or convertible or
exchangeable securities, by dividing (x) the total amount received or receivable
by the Company in consideration of the sale and issuance of such rights,
options, warrants, or convertible or exchangeable securities, plus the minimum
aggregate consideration payable to the Company upon exercise, conversion, or
exchange thereof, by (y) the maximum number of shares covered by such rights,
options, warrants, or convertible or exchangeable securities) lower than the
Exercise Price per share of Common Stock in effect immediately prior to such
issuance, then the Exercise Price shall be reduced on the date of such issuance
to a price (calculated to the nearest cent) determined by multiplying the
Exercise Price in effect immediately prior to such issuance by a fraction, (iii)
the numerator of which shall be an amount equal to the sum of (A) the number of
shares of Common Stock outstanding immediately prior to such issuance plus (B)
the quotient obtained by dividing the consideration received by the Company upon
such issuance by such current Exercise Price, and (iv) the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
after such issuance. For the purposes of such adjustments, the maximum number of
shares which the
4
<PAGE>
holders of any such rights, options, warrants, or convertible or exchangeable
securities shall be entitled to initially subscribe for or purchase or convert
or exchange such securities into shall be deemed to be issued and outstanding as
of the date of such issuance, and the consideration received by the Company
therefor shall be deemed to be the consideration received by the Company for
such rights, options, warrants, or convertible or exchangeable securities, plus
the minimum aggregate consideration or premiums stated in such rights, options,
warrants, or convertible or exchangeable securities to be paid for the shares
covered thereby. No further adjustment of the Exercise Price shall be made as a
result of the actual issuance of shares of Common Stock on exercise of such
rights, options, or warrants or on conversion or exchange of such convertible or
exchangeable securities. On the expiration or the termination of such rights,
options, or warrants, or the termination of such right to convert or exchange,
the Exercise Price shall be readjusted (but only with respect to Warrants
exercised after such expiration or termination) to such Exercise Price as would
have obtained had the adjustments made upon the issuance of such rights,
options, warrants, or convertible or exchangeable securities been made upon the
basis of the delivery of only the number of shares of Common Stock actually
delivered upon the exercise of such rights, options, or warrants or upon the
conversion or exchange of any such securities; and on any change of the number
of shares of Common Stock deliverable upon the exercise of any such rights,
options, or warrants or conversion or exchange of such convertible or
exchangeable securities or any change in the consideration to be received by the
Company upon such exercise, conversion, or exchange, including, but not limited
to, a change resulting from the antidilution provisions thereof, the Exercise
Price, as then in effect, shall forthwith be readjusted (but only with respect
to Warrants exercised after such change) to such Exercise Price as would have
been obtained had an adjustment been made upon the issuance of such rights,
options, or warrants not exercised prior to such change, or securities not
converted or exchanged prior to such change, on the basis of such change. In
case the Company shall issue shares of Common Stock or any such rights, options,
warrants, or convertible or exchangeable securities for a consideration
consisting, in whole or in part, of property other than cash or its equivalent,
then the "price per share" and the "consideration received by the Company" for
purposes of the first sentence of this Section 5(d) shall be as determined in
good faith by the board of directors of the Company, whose determination shall
be conclusive absent manifest error. Shares of Common Stock owned by or held for
the account of the Company or any majority-owned subsidiary shall not be deemed
outstanding for the purpose of any such computation.
(e) No adjustment in the Exercise Price shall be required if such
adjustment is less than $.05; provided, however, that any adjustments which by
reason of this Section 5 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 5 shall be made to the nearest cent or to the nearest one-thousandth of
a share, as the case may be.
(f) In any case in which this Section 5 shall require that an adjustment in
the Exercise Price be made effective as of a record date for a specified event,
the Company may elect to defer, until the occurrence of such event, issuing to
the Holder, if the Holder exercised this
5
<PAGE>
Warrant after such record date, the shares of Common Stock, if any, issuable
upon such exercise over and above the shares of Common Stock, if any, issuable
upon such exercise on the basis of the Exercise Price in effect prior to such
adjustment; provided, however, that the Company shall deliver to the Holder a
due bill or other appropriate instrument evidencing the Holder's right to
receive such additional shares upon the occurrence of the event requiring such
adjustment
(g) Upon each adjustment of the Exercise Price as a result of the
calculations made in Sections 5(b), 5(c) or 5(d) hereof, this Warrant shall
thereafter evidence the right to purchase, at the adjusted Exercise Price, that
number of shares (calculated to the nearest thousandth) obtained by dividing (A)
the product obtained by multiplying the number of shares purchasable upon
exercise of this Warrant prior to adjustment of the number of shares by the
Exercise Price in effect prior to adjustment of the Exercise Price by (B) the
Exercise Price in effect after such adjustment of the Exercise Price.
(h) Whenever there shall be an adjustment as provided in this Section 5,
the Company shall promptly cause written notice thereof to be sent by registered
mail, postage prepaid, to the Holder, at its address as it shall appear in the
Warrant Register, which notice shall be accompanied by an officer's certificate
setting forth the number of Warrant Shares purchasable upon the exercise of this
Warrant and the Exercise Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment and the computation thereof,
which officer's certificate shall be conclusive evidence of the correctness of
any such adjustment absent manifest error.
6. (a) In case of any consolidation with or merger of the Company with or
into another corporation (other than a merger or consolidation in which the
Company is the surviving or continuing corporation), or in case of any sale,
lease, or conveyance to another corporation of the property and assets of any
nature of the Company as an entirety or substantially as an entirety, such
successor, leasing, or purchasing corporation, as the case may be, shall (i)
execute with the Holder an agreement providing that the Holder shall have the
right thereafter to receive upon exercise of this Warrant solely the kind and
amount of shares of stock and other securities, property, cash, or any
combination thereof receivable upon such consolidation, merger, sale, lease, or
conveyance by a holder of the number of shares of Common Stock for which this
Warrant; might have been exercised immediately prior to such consolidation,
merger, sale, lease, or conveyance and (ii) make effective provision in its
certificate of incorporation or otherwise, if necessary, to effect such
agreement. Such agreement shall provide for adjustments which shall be as nearly
equivalent as practicable to the adjustments in Section 5.
(b) In case of any reclassification or change of the shares of Common Stock
issuable upon exercise of this Warrant (other than a change in par value or from
no par value to a specified par value, or as a result of a subdivision or
combination, but including any change in the shares into two or more classes or
series of shares), or in case of any consolidation or merger of another
corporation into the Company in which the Company is the continuing corporation
6
<PAGE>
and in which there is a reclassification or change (including a change to the
right to receive cash or other property) of the shares of Common Stock (other
than a change in par value, or from no par value to a specified par value, or as
a result of a subdivision or combination, but including any change in the shares
into two or more classes or series of shares), the Holder shall have the right
thereafter to receive upon exercise of this Warrant solely the kind and amount
of shares of stock and other securities, property, cash, or any combination
thereof receivable upon such reclassification, change, consolidation, or merger
by a holder of the number of shares of Common Stock for which this Warrant might
have been exercised immediately prior to such reclassification, change,
consolidation, or merger. Thereafter, appropriate provision shall be made for
adjustments which shall be as nearly equivalent as practicable to the
adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, leases, or conveyances.
7. In case at any time the Company shall propose
(a) to pay any dividend or make any distribution on shares of Common
Stock in shares of Common Stock or make any other distribution (other than
regularly scheduled cash dividends which are not in a greater amount per
share than the most recent such cash dividend) to all holders of Common
Stock; or
(b) to issue any rights, warrants, or other securities to all holders
of Common Stock entitling them to purchase any additional shares of Common
Stock or any other rights, warrants, or other securities; or
(c) to effect any reclassification or change of outstanding shares of
Common Stock, or any consolidation, merger, sale, lease, or conveyance of
property, described in Section 6; or
(d) to effect any liquidation, dissolution, or winding-up of the
Company; or
(e) to take any other action which would cause an adjustment to the
Exercise Price;
then, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least 15
days prior to (i) the date as of which the holders of record of shares of Common
Stock to be entitled to receive any such dividend, distribution, rights,
warrants, or other securities are to be determined, (ii) the date on which any
such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up is expected to become effective, and the date
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<PAGE>
as of which it is expected that holders of record of shares of Common Stock
shall be entitled to exchange their shares for securities or other property, if
any, deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up, or (iii) the date of such action which would require
an adjustment to the Exercise Price.
8. (a) If at any time prior to the expiration of the Exercise Period, the
Company shall file a registration statement (other than a registration statement
on Form S-4, Form S-8, or any successor form) with the Securities and Exchange
Commission (the "Commission") while any Registrable Securities (as hereinafter
defined) are outstanding, the Company shall give all the then holders of any
Registrable Securities (the "Eligible Holders") at least 30 days prior written
notice of the filing of such registration statement. If requested by any
Eligible Holder in writing within 20 days after receipt of any such notice, the
Company shall, at the Company's sole expense (other than the fees and
disbursements of counsel for the Eligible Holders and the underwriting
discounts, if any, payable in respect of the Registrable Securities sold by any
Eligible Holder), register or qualify all or, at each Eligible Holder's option,
any portion of the Registrable Securities of any Eligible Holders who shall have
made such request, concurrently with the registration of such other securities,
all to the extent requisite to permit the public offering, and sale of the
Registrable Securities through the facilities of all appropriate securities
exchanges and the over-the-counter market, and will use its best efforts through
its officers, directors, auditors, and counsel to cause such registration
statement to become effective as promptly as practicable. Notwithstanding the
foregoing, if the managing underwriter of any such offering shall advise the
Company in writing that, in its opinion, the distribution of all or a portion of
the Registrable Securities requested to be included in the registration
concurrently with the securities being registered by the Company would
materially adversely affect the distribution of such securities by the Company
for its own account, then any Eligible Holder who shall have requested
registration of his or its Registrable Securities shall delay the offering and
sale of such Registrable Securities (or the portions thereof so designated by
such managing underwriter) for such period, not to exceed 90 days (the "Delay
Period"), as the managing underwriter shall request, provided that no such delay
shall be required as to any Registrable Securities if any securities of the
Company are included in such registration statement and eligible for sale during
the Delay Period for the account of any person other than the Company and any
Eligible Holder unless the securities included in such registration statement
and eligible for sale during the Delay Period for such other person shall have
been reduced pro rata to the reduction of the Registrable Securities which were
requested to be included and eligible for sale during the Delay Period in such
registration. As used herein' "Registrable Securities" shall mean the Warrants
and the Warrant Shares which, in each case, have not been previously sold
pursuant to a registration statement or Rule 144 promulgated under the Act.
(b) If, at any time prior to the expiration of the Exercise Period, the
Company shall receive a written request, from Eligible Holders who in the
aggregate own (or upon exercise of all Warrants then outstanding or issuable
would own) 50% of the total number of shares of Common Stock then included (or
upon such exercises would be included) in the Registrable
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<PAGE>
Securities (the "Majority Holders"), to register the sale of all or part of such
Registrable Securities, the Company shall, as promptly as practicable, prepare
and file with the Commission a registration statement sufficient to permit the
public offering and sale of the Registrable Securities through the facilities of
all appropriate securities exchanges and the over-the-counter market, and will
use its best efforts through its officers, directors, auditors, and counsel to
cause such registration statement to become effective as promptly as
practicable; provided, however, that the Company shall only be obligated to file
one such registration statement for which all expenses incurred in connection
with such registration (other than the fees and disbursements of counsel for the
Eligible Holders and underwriting discounts, if any, payable in respect of the
Registrable Securities sold by the Eligible Holders) shall be borne by the
Company. The Company shall not be obligated to effect any registration of its
securities pursuant to this Section 8(b) within six months after the effective
date of a previous registration statement prepared and filed in accordance with
Sections 8(a) or 8(b). Within three business days after receiving any request
contemplated by this Section 8(b), the Company shall give written notice to all
the other Eligible Holders, advising each of them that the Company is proceeding
with such registration and offering to include therein all or any portion of any
such other Eligible Holder's Registrable Securities, provided that the Company
receives a written request to do so from such Eligible Holder within 30 days
after receipt by him or it of the Company's notice.
(c) In the event of a registration pursuant to the provisions of this
Section 8, the Company shall use its best efforts to cause the Registrable
Securities so registered to be registered or qualified for sale under the
securities or blue sky laws of such jurisdictions as the Eligible Holder or such
holders may reasonably request; provided, however, that the Company shall not be
required to qualify to do business in any state by reason of this Section 8(c)
in which it is not otherwise required to qualify to do business.
(d) The Company shall keep effective any registration or qualification
contemplated by this Section 8 and shall from time to time amend or supplement
each applicable registration statement, preliminary prospectus, final
prospectus, application, document, and communication for such period of time as
shall be required to permit the Eligible Holders to complete the offer and sale
of the Registrable Securities covered thereby. The Company shall in no event be
required to keep any such registration or qualification in effect for a period
in excess of nine months from the date on which the Eligible Holders are first
free to sell such Registrable Securities; provided, however, that, if the
Company is required to keep any such registration or qualification in effect
with respect to securities other than the Registrable Securities beyond such
period, the Company shall keep such registration or qualification in effect as
it relates to the Registrable Securities for so long as such registration or
qualification remains or is required to remain in effect in respect of such
other securities.
(e) In the event of a registration pursuant to the provisions of this
Section 8, the Company shall furnish to each Eligible Holder such number of
copies of the registration statement and of each amendment and supplement
thereto (in each case, including all exhibits), such reasonable number of copies
of each prospectus contained in such registration statement and
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each supplement or amendment thereto (including each preliminary prospectus),
all of which shall conform to the requirements of the Act and the rules and
regulations thereunder, and such other documents, as any Eligible Holder may
reasonably request to facilitate the disposition of the Registrable Securities
included in such registration.
(f) In the event of a registration pursuant to the provisions of this
Section 8, the Company shall furnish each Eligible Holder of any Registrable
Securities so registered with an opinion of its counsel (reasonably acceptable
to the Eligible Holders) to the effect that (i) the registration statement has
become effective under the Act and no order suspending the effectiveness of the
registration statement, preventing or suspending the use of the registration
statement, any preliminary prospectus, any final prospectus, or any amendment or
supplement thereto has been issued, nor has the Commission or any securities or
blue sky authority of any jurisdiction instituted or threatened to institute any
proceedings with respect to such an order, (ii) the registration statement and
each prospectus forming a part thereof (including each preliminary prospectus),
and any amendment or supplement thereto, complies as to form with the Act and
the rules and regulations thereunder, and (iii) such counsel has no knowledge of
any material misstatement or omission in such registration statement or any
prospectus, as amended or supplemented. Such opinion shall also state the
jurisdictions in which the Registrable Securities have been registered or
qualified for sale pursuant to the provisions of Section 8(c).
(g) In the event of a registration pursuant to the provision of this
Section 8, the Company shall enter into a cross-indemnity agreement and a
contribution agreement, each in customary form, with each underwriter, if any,
and, if requested, enter into an underwriting agreement containing conventional
representations, warranties, allocation of expenses, and customary closing
conditions, including, but not limited to, opinions of counsel and accountants'
cold comfort letters, with any underwriter who acquires any Registrable
Securities.
(h) In the event of a registration pursuant to the provisions of this
Section 8:
(i) Each Eligible Holder shall furnish to the Company in writing such
appropriate information (relating to such Eligible Holder and the intention
of such Eligible Holder as to proposed methods of sale or other disposition
of their shares of Common Stock) and the identity of and compensation to be
paid to any proposed underwriters to be employed in connection therewith as
the Company, any underwriter, or the Commission or any other regulatory
authority may request;
(ii) the Eligible Holders shall enter into the usual and customary
form of underwriting agreement agreed to by the Company and any underwriter
with respect to any such offering, if required, and such underwriting
agreement shall contain the customary rights of indemnity between the
Company, the underwriters, and such Eligible Holders;
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(iii) each Eligible Holder shall agree that he shall execute, deliver
and/or file with or supply the Company, any underwriters, the Commission
and/or any state or other regulatory authority such information, documents,
representations, undertakings and/or agreements necessary to carry out the
provisions of the registration covenants contained in this Section 8 and/or
to effect the registration or qualification of his or its Registrable
Securities under the Act and/or any of the laws and regulations of any
state of governmental instrumentality;
(iv) the Company's obligation to include any Registrable Securities in
a registration statement shall be subject to the written agreement of each
holder thereof to offer such securities in the same manner and on the same
terms and conditions as the other securities of the same class are being
offered pursuant to the registration statement, if such shares are being
underwritten; sold on;
(v) in the event that all the Registrable Securities have not been or
prior to the expiration of the period specified in Section 8(d) above, the
Company may de-register by post-effective amendment any Registrable
Securities covered by the registration statement, but not sold on or prior
to such date. The Company agrees that it will notify each holder of
Registrable Securities of the filing and effective date of such
post-effective amendment; and
(vi) each Eligible Holder agrees that upon notification by the Company
that the prospectus in respect to any public offering covered by the
provisions hereof is in need of revision, such Eligible Holder shall
immediately upon receipt of such notification (x) cease to offer or sell
any securities of the Company which must be accompanied by such prospectus,
(y) return all such prospectuses in such Eligible Holder's hands to the
Company, and (z) not offer or sell any securities of the Company until such
Holder has been provided with a current prospectus and the Company has
given such Eligible Holder notification permitting such Eligible Holder to
resume offers and sales.
(i) The Company agrees that until all the Registrable Securities have been
sold under a registration statement or pursuant to Rule 144 under the Act, it
shall keep current in filing all reports, statements and other materials
required to be filed with the Commission to permit holders of the Registrable
Securities to sell such securities under Rule 144.
(j) Except for rights granted to holders of the Warrants, the Company will
not, without the written consent of the Majority Holders, grant to any persons
the right to request the Company to register any securities of the Company,
provided that the Company may grant such registration rights to other persons so
long as such rights are subordinate or pari passu to the rights of the Eligible
Holders.
9. (a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each Eligible Holder, its officers, directors,
partners, employees,
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agents and counsel, and each person, if any, who controls any such person within
the meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), from and against any and all loss,
liability, charge, claim, damage, and expense whatsoever (which shall include,
for all purposes of this Section 9, but not be limited to, attorneys' fees and
any and all reasonable expense whatsoever incurred in investigating, preparing,
or defending against any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim or
litigation), as and when incurred, arising out of, based upon, or in connection
with: (i) any untrue statement or alleged untrue statement of a material fact
contained (A) in any registration statement, preliminary prospectus, or final
prospectus (as from time to time amended and supplemented), or any amendment or
supplement thereto, relating to the sale of any of the Registrable Securities,
or (B) in any application or other document or communication (in this Section 9
collectively called an application") executed by or on behalf of the Company or
based upon written information furnished by or on behalf of the Company filed in
any jurisdiction in order to register or qualify any of the Registrable
Securities under the securities or blue sky laws thereof or filed with the
Commission or any securities exchange; or (ii) any omission or alleged omission
to state a material fact required to be stated in any document referenced in
clause (A) or (B) above or necessary to make the statements therein not
misleading, unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company with respect to
such Eligible Holder by or on behalf of such person expressly for inclusion in
any registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be; or
(iii) any breach of any representation, warranty, covenant, or agreement of the
Company contained in this Warrant. The foregoing agreement to indemnify shall be
in addition to any liability the Company may otherwise have, including
liabilities arising under this Warrant.
If any action is brought against any Eligible Holder or any of its
officers, directors, partners, employees, agents, or counsel, or any controlling
persons of such person (an "indemnified party") in respect of which indemnity
may be sought against the Company pursuant to the foregoing paragraph, such
indemnified party or parties shall promptly notify the Company in writing of the
institution of such action (but the failure so to notify shall not relieve the
Company from any liability other than pursuant to this Section 9(a), except to
the extent it may have been prejudiced in any material respect by such failure)
and the Company shall promptly assume the defense of such action, including the
employment of counsel (reasonably satisfactory to such indemnified party or
parties) and payment of expenses. Such indemnified party or parties shall have
the right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless the employment of such counsel shall have been authorized in
writing by the Company in connection with the defense of such action or the
Company shall not have promptly employed counsel reasonably satisfactory to such
indemnified party or parties to have charge of the defense of such action or
such indemnified party or parties shall have reasonably concluded that there may
be one or more legal defenses available to it or them or to other indemnified
parties which are different from or additional to those available to the
Company, in any of which events such
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<PAGE>
fees and expenses shall be borne by the Company and the Company shall not have
the right to direct the defense of such action on behalf of the indemnified
party or parties. Anything in this Section 10 to the contrary notwithstanding,
the Company shall not be liable for any settlement of any such claim or action
effected without its written consent, which shall not be unreasonably withheld.
The Company shall not, without the prior written consent of each indemnified
party that is not released as described in this sentence, settle or compromise
any action, or permit a default or consent to the entry of judgment in or
otherwise seek to terminate any pending or threatened action, in respect of
which indemnity may be sought hereunder (whether or not any indemnified party is
a party thereto), unless such settlement, compromise, consent, or termination
includes an unconditional release of each indemnified party from all liability
in respect of such action. The Company agrees promptly to notify the Eligible
Holders of the commencement of any litigation or proceedings against the Company
or any of its officers or directors in connection with the sale of any
Registrable Securities or any preliminary prospectus, prospectus, registration
statement, or amendment or supplement thereto, or any application relating to
any sale of any Registrable Securities.
(b) The Holder agrees to indemnify and hold harmless the Company, each
director of the Company, each officer of the Company who shall have signed any
registration statement covering Registrable Securities held by the Holder, each
other person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, and its or their respective
counsel, to the same extent as the foregoing indemnity from the Company to the
Holder in Section 9(a), but only with respect to statements or omissions, if
any, made in any registration statement, preliminary prospectus, or final
prospectus (as from time to time amended and supplemented), or any amendment or
supplement thereto, or in any application, in reliance upon and in conformity
with written information furnished to the Company with respect to the Holder by
or on behalf of the Holder expressly for inclusion in any such registration
statement, preliminary prospectus, or final prospectus, or any amendment or
supplement thereto, or in any application, as the case may be. If any action
shall be brought against the Company or any other person so indemnified based on
any such registration statement, preliminary prospectus, or final prospectus, or
any amendment or supplement thereto, or in any application, and in respect of
which indemnity may be sought against the Holder pursuant to this Section 9(b),
the Holder shall have the rights and duties given to the Company, and the
Company and each other person so indemnified shall have the rights and duties
given to the indemnified parties, by the provisions of Section 9(a).
(c) To provide for just and equitable contribution, if (i) an indemnified
party makes a claim for indemnification pursuant to Section 9(a) or 9(b)
(subject to the limitations thereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Act, the Exchange Act or otherwise, then the
Company (including for this purpose any contribution made by or on behalf of any
director of the Company, any officer of the Company who signed any such
registration statement, any controlling person of the Company,
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<PAGE>
and its or their respective counsel), as one entity, and the Eligible Holders of
the Registrable Securities included in such registration in the aggregate
(including for this purpose any contribution by or on behalf of an indemnified
party), as a second entity, shall contribute to the losses, liabilities, claims,
damages, and expenses whatsoever to which any of them may be subject, on the
basis of relevant equitable considerations such as the relative fault of the
Company and such Eligible Holders in connection with the facts which resulted in
such losses, liabilities, claims, damages, and expenses. The relative fault, in
the case of an untrue statement, alleged untrue statement, omission, or alleged
omission, shall be determined by, among other things, whether such statement,
alleged statement, omission, or alleged omission relates to information supplied
by the, Company or by such Eligible Holders, and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement, alleged statement, omission, or alleged omission. The Company and the
Holder agree that it would be unjust and inequitable if the respective
obligations of the Company and the Eligible Holders for contribution were
determined by pro rata or per capita allocation of the aggregate losses,
liabilities, claims, damages, and expenses (even if the Holder and the other
indemnified parties were treated as one entity for such purpose) or by any other
method of allocation that does not reflect the equitable considerations referred
to in this Section 9(c). In no case shall any Eligible Holder be responsible for
a portion of the contribution obligation imposed on all Eligible Holders in
excess of its pro rata share based on the number of shares of Common Stock owned
(or which would be owned upon exercise of the Registrable Securities) by it and
included in such registration as compared to the number of shares of Common
Stock owned (or which would be owned upon exercise of the Registrable
Securities) by all Eligible Holders and included in such registration. No person
guilty of a fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who is not guilty of
such fraudulent misrepresentation. For purposes of this Section 9(c), each
person, if any, who controls any Eligible Holder within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act and each officer, director,
partner, employee, agent, and counsel of each such Eligible Holder or control
person shall have the same rights to contribution as such Eligible Holder or
control person and each person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, each
officer of the Company who shall have signed any such registration statement,
each director of the Company, and its or their respective counsel shall have the
same rights to contribution as the Company, subject in each case to the
provisions of this Section 9(c). Anything in this Section 9(c) to the contrary
notwithstanding, no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its written consent. This
Section 9(c) is intended to supersede any right to contribution under the Act,
the Exchange Act or otherwise.
10. The issuance of any shares or other securities upon the exercise of
this Warrant, and the delivery of certificates or other instruments representing
such shares or other securities, shall be made without charge to the Holder for
any tax or other charge in respect of such issuance. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of any certificate in a name other
than that of the Holder and the Company shall not be required to issue or
deliver any such certificate
14
<PAGE>
unless and until the person or persons requesting the issue thereof shall have
paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
11. Certificates evidencing the Warrant Shares issued upon exercise of the
Warrants shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
SUCH SHARES MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT, OR AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT."
12. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Warrant (and upon surrender of any
Warrant if mutilated), and upon reimbursement of the Company's reasonable
incidental expenses, the Company shall execute and deliver to the Holder thereof
a new Warrant of like date, tenor, and denomination.
13. The Holder of any Warrant shall not have, solely on account of such
status, any rights of a stockholder of the Company, either at law or in equity,
or to any notice of meetings of stockholders or of any other proceedings of the
Company, except as provided in this Warrant.
14. Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested or sent by Federal Express, Express Mail, or similar overnight
delivery or courier service or delivered (in person or by telecopy, telex, or
similar telecommunications equipment) against receipt to the party to whom it is
to be given, if sent to the Company, at: 150 East 58th Street, Suite 3400, New
York, New York 10155, Attention: The Chairman or the Chief Executive Officer; or
if sent to the Holder, at the Holder's address as it shall appear on the Warrant
Register; or to such other address as the party shall have furnished in writing
in accordance with the provisions of this Section 14. Any notice or other
communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party's address which will
be deemed given at the time of receipt thereof. Any notice given by other means
permitted by this Section 14 shall be deemed given at the time of receipt
thereof.
15. This Warrant shall be binding upon the Company and its successors and
assigns and shall inure to the benefit of the Holder and its successors and
assigns.
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16. This Warrant shall be construed in accordance with the laws of the
State of New York applicable to contracts made and performed within such State,
without regard to principles of conflicts of law.
17. The Company irrevocably consents to the jurisdiction of the courts of
the State of New York and of any federal court located in such State in
connection with any action or proceeding arising out of or relating to this
Warrant, any document or instrument delivered pursuant to, in connection with or
simultaneously with this Warrant, or a breach of this Warrant or any such
document or instrument. In any such action or proceeding, the Company waives
personal service of any summons, complaint or other process.
Dated: February 10, 1998 COMMODORE APPLIED TECHNOLOGIES, INC.
By: /s/ Michael D. Fullwood
--------------------------------------------
Name: Michael D. Fullwood
Title: Senior Vice President, Chief Financial
and Administrative Officer, Secretary
and General Counsel
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<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, _____________________ hereby sells, assigns, and
transfers unto ____________________ a Warrant to purchase Shares, par value
$.001 per share, of Commodore Applied Technologies, Inc. (the "Company"),
together with all right, title, and interest therein, and does hereby
irrevocably constitute and appoint ___________________ attorney to transfer such
Warrant on the books of the Company, with full power of substitution.
Dated: __________________________
Signature______________________________
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.
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<PAGE>
To: Commodore Applied Technologies, Inc.
150 East 58th Street, Suite 3400
New York, New York 10155
ELECTION TO EXERCISE
The undersigned hereby exercises its rights to purchase ______________
Warrant Shares covered by the within warrant and tenders payment herewith in the
amount of $ _____________ in accordance with the terms thereof, and requests
that certificates for such securities be issued in the name of, and delivered
to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated:_______________________________ Name _____________________________________
(Print)
Address:________________________________________________________________________
_____________________________________
(Signature)
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<PAGE>
To: Commodore Applied Technologies, Inc.
150 East 58th Street, Suite 3400
New York, New York 10155
NOTICE OF CASHLESS EXERCISE
(To be executed upon exercise of warrant
pursuant to Section 1(b))
The undersigned hereby irrevocably elects to exchange its Warrant for
_______________ Warrant Shares pursuant to the cashless exercise provisions of
the within Warrant, as provided for in Section 1(b) of such Warrant, and
requests that a certificate or certificates for such Warrant Shares be issued
in the name of and delivered to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
which the undersigned is entitled to purchase in accordance with the within
Warrant, that a new Warrant for the balance of the Warrant Shares covered by the
within Warrant be registered in the name of, and delivered to, the undersigned
at the address stated below.
Dated:_______________________________ Name _____________________________________
(Print)
Address:________________________________________________________________________
_____________________________________
(Signature)
(Signature must conform in all
respects to the name of the Holder
as specified on the face of the
Warrant)
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<PAGE>
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR THE
SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER THE
WARRANTS NOR SUCH SHARES MAY BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT, OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
COMMODORE APPLIED TECHNOLOGIES, INC.
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
No. 3 1,500,000 Shares
THIS CERTIFIES that, for value received, Commodore Environmental Services,
Inc. (the "Holder"), is entitled to subscribe for and purchase from Commodore
Applied Technologies, Inc., a Delaware corporation (the "Company"), subject to
compliance with any applicable stockholder approval or notice requirements, and
upon the terms and conditions set forth herein, at any time or from time to time
after the date hereof, and before 5:00 P.M. on February 9, 2004, New York time
(the "Exercise Period"), One Million Five Hundred Thousand (1,500,000) shares,
par value $.001 per share, of the Company ("Common Stock"), at an exercise price
of $10.00 per share (the "Exercise Price"). This Warrant, is being issued in
partial consideration of the Holder's loan of $5.45 million to the Company
pursuant to a promissory note, dated of even date herewith from the Company to
the Holder. As used herein the term "this Warrant" shall mean and include this
Warrant and any Warrant or Warrants hereafter issued as a consequence of the
exercise or transfer of this Warrant in whole or in part.
The number of shares of Common Stock issuable upon exercise of the Warrants
(the "Warrant Shares") and the Exercise Price may be adjusted from time to time
as hereinafter set forth.
1. This Warrant may be exercised during the Exercise Period, as to the
whole or any lesser number of the respective whole Warrant Shares, as follows:
(a) by the surrender of this Warrant (with the form of election at the
end hereof duly executed) to the Company at its office as set forth in the
form of election attached hereto, or at such other place as is designated in
writing by the Company, together with a certified or bank cashier's check
payable to the order of the Company in an amount equal to the Exercise Price
multiplied by the number of respective Warrant Shares for which this Warrant
is being exercised; or
(b) by surrender of this Warrant (with the notice of cashless exercise
at the end hereof duly executed) to the Company at its office as set forth in
the notice of cashless exercise attached hereto, or at such other place as is
designated in writing by the Company, in which event the Company shall issue
to the Holder the number of Warrant Shares determined as follows:
X = Y(A-B)/A
where:
X = the number of Warrant Shares to be issued to the Holder.
Y = the number of Warrant Shares with respect to which this Warrant
is being exercised.
A = the closing sale price of the Common Stock for the trading day
immediately prior to the date of exercise.
B = the Exercise Price.
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<PAGE>
2. Upon each exercise of the Holder's rights to purchase Warrant Shares,
either pursuant to Section 1(a) or (b) above, the Holder shall be deemed to be
the holder of record of the Warrant Shares issuable upon such exercise,
notwithstanding that the transfer books of the Company shall then be closed or
certificates representing such Warrant Shares shall not then have been
actually delivered to the Holder. For purposes of Rule 144 promulgated under
the Securities Act of 1933, as amended (the "Act"), it is intended, understood
and acknowledged that the Warrant Shares issued in a cashless exercise
transaction pursuant to Section 1(b) above shall be deemed to have been
acquired by the Holder, and the holding period for the Warrant Shares shall be
deemed to have been commenced, on the issue date of the Warrant. As soon as
practicable after each such exercise of this Warrant and payment of the Holder
a certificate or certificates for the Warrant Shares issuable upon such
exercise, registered in the name of the Holder or its designee. If the Warrant
should be exercised in part only, the Company shall, upon surrender of this
Warrant for cancellation, execute and deliver a new Warrant evidencing the
right of the Holder to purchase the balance of the Warrant Shares (or portions
thereof) subject to purchase hereunder.
3. Any Warrants issued upon the transfer or exercise in part of this
Warrant shall be numbered and shall be registered in a Warrant Register as they
are issued. The Company shall be entitled to treat the registered holder of any
Warrant on the Warrant Register as the Owner in fact thereof for all purposes
and shall not be bound to recognize any equitable or other claim to or interest
in such Warrant on the part of any other person, and shall not be liable for any
registration or transfer of Warrants which are registered or to be registered in
the name of a fiduciary or the nominee of a fiduciary unless made with the
actual knowledge that a fiduciary or nominee is committing a breach of trust in
requesting such registration or transfer, or with the knowledge of such facts
that its participation therein amounts to bad faith. This Warrant shall be
transferable only on the books of the Company upon delivery thereof duly
endorsed by the Holder or by his duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment, or authority to
transfer. In all cases or transfer by an attorney, executor, administrator,
guardian, or other legal representative, duly authenticated evidence of his or
its authority shall be produced. Upon any registration of transfer, the Company
shall deliver a new Warrant or Warrants to the person entitled thereto. This
Warrant may be exchanged, at the option of the Holder thereof, for another
Warrant, or other Warrants of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of Warrant
Shares (or portions thereof), upon surrender to the Company or its duly
authorized agent. Notwithstanding the foregoing, the Company shall have no
obligation to cause Warrants to be transferred on its books to any person if, in
the opinion of counsel to the Company, such transfer does not comply with the
provisions of the Act and the rules and regulations thereunder.
4. The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of the rights to purchase all Warrant Shares granted pursuant to
the Warrants, such number of shares of Common Stock as shall, from time to
time, be sufficient therefor. The Company covenants that all shares of Common
Stock issuable upon exercise of this Warrant, upon receipt by the Company of
the full Exercise Price therefor if such exercise is pursuant to Section 1(a)
above, or upon receipt by the Company of the notice of cashless exercise duly
executed if such exercise is pursuant to Section 1(b) above, shall be validly
issued, fully paid, nonassessable, and free of preemptive rights.
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<PAGE>
5. (a) In case the Company shall at any time after the date the Warrants
were first issued (i) declare a dividend on the outstanding Common Stock payable
in shares of its capital stock, (ii) subdivide the outstanding Common Stock,
(iii) combine the outstanding Common Stock into a smaller number of shares, or
(iv) issue any shares of its capital stock by reclassification of the Common
Stock (including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation), then, in each case,
the Exercise Price, and the number of Warrant Shares issuable upon exercise of
this Warrant, in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination, or reclassification, shall
be proportionately adjusted so that the Holder after such time shall be entitled
to receive the aggregate number and kind of shares which, if such Warrant had
been exercised immediately prior to such time, he would have owned upon such
exercise and been entitled to receive by virtue of such dividend, subdivision,
combination, or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) In case the Company shall issue or fix a record date for the issuance
to all holders of Common Stock of rights, options, or warrants to subscribe for
or purchase Common Stock (or securities convertible into or exchangeable for
Common Stock) at a price per share (or having a conversion or exchange price per
share, if a security convertible into or exchangeable for Common Stock) less
than the Exercise Price per share of Common Stock on such record date, then, in
each case, the Exercise Price shall be adjusted by multiplying the Exercise
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding on
such record date plus the number of shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock so to be offered
(or the aggregate initial conversion or exchange price of the convertible or
exchangeable securities so to be offered) would purchase at such current
Exercise Price and the denominator of which shall be the number of shares of
Common Stock outstanding on such record date plus the number of additional
shares of Common Stock to be offered for subscription or purchase (or into which
the convertible or exchangeable securities so to be offered are initially
convertible or exchangeable). Such adjustment shall become effective at the
close of business on such record date; provided, however, that, to the extent
the shares of Common Stock (or securities convertible into or exchangeable for
shares of Common Stock) are not delivered, the Exercise Price shall be
readjusted after the expiration of such rights, options, or warrants (but only
with respect to Warrants exercised after such expiration), to the Exercise Price
which would then be in effect had the adjustments made upon the issuance of such
rights, options, or warrants been made upon the basis of delivery of only the
number of shares of Common Stock (or securities convertible into or exchangeable
for shares of Common Stock) actually issued. In case any subscription price may
be paid in a consideration part or all of which shall be in a form other than
cash, the value of such consideration shall be as determined in good faith by
the board of directors of the Company, whose determination shall be conclusive
absent manifest error. Shares of Common Stock owned by or held for the account
of the Company or any majority-owned subsidiary shall not be deemed outstanding
for the purpose of any such computation.
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(c) In case the Company shall distribute to all holders of Common Stock
(including any such distribution made to the stockholders of the Company in
connection with a consolidation or merger in which the Company is the continuing
corporation) evidences of its indebtedness or assets (other than cash dividends
or distributions and dividends payable in shares of Common Stock), or rights,
options, or warrants to subscribe for or purchase Common Stock, or securities
convertible into or exchangeable for shares of Common Stock (excluding those
with respect to the issuance of which an adjustment of the Exercise Price is
provided pursuant to Section 5(b) hereof), then, in each case, the Exercise
Price shall be adjusted by multiplying the Exercise Price in effect immediately
prior to the record date for the determination of stockholders entitled to
receive such distribution by a fraction, the numerator of which shall be the
Exercise Price per share of Common Stock on such record date, less the fair
market value (as determined in good faith by the board of directors of the
Company, whose determination shall be conclusive absent manifest error) of the
portion of the evidences of indebtedness or assets so to be distributed, or of
such rights, options, or warrants or convertible or exchangeable securities,
applicable to one share, and the denominator of which shall be such current
Exercise Price per share of Common Stock. Such adjustment shall be made whenever
any such distribution is made, and shall become effective on the record date for
the determination of shareholders entitled to receive such distribution.
(d) In case the Company shall issue shares of Common Stock or rights,
options, or warrants to subscribe for or purchase Common Stock, or securities
convertible into or exchangeable for Common Stock (excluding shares, rights,
options, warrants, or convertible or exchangeable securities issued or issuable
(i) in any of the transactions with respect to which an adjustment of the
Exercise Price is provided pursuant to Sections 5(a), 5(b) or 5(c) above, (ii)
upon exercise of the Warrants or (iii) to management or employees of the Company
up to a maximum amount of shares of Common Stock), at a price per share
(determined, in the case of such rights, options, warrants, or convertible or
exchangeable securities, by dividing (x) the total amount received or receivable
by the Company in consideration of the sale and issuance of such rights,
options, warrants, or convertible or exchangeable securities, plus the minimum
aggregate consideration payable to the Company upon exercise, conversion, or
exchange thereof, by (y) the maximum number of shares covered by such rights,
options, warrants, or convertible or exchangeable securities) lower than the
Exercise Price per share of Common Stock in effect immediately prior to such
issuance, then the Exercise Price shall be reduced on the date of such issuance
to a price (calculated to the nearest cent) determined by multiplying the
Exercise Price in effect immediately prior to such issuance by a fraction, (iii)
the numerator of which shall be an amount equal to the sum of (A) the number of
shares of Common Stock outstanding immediately prior to such issuance plus (B)
the quotient obtained by dividing the consideration received by the Company upon
such issuance by such current Exercise Price, and (iv) the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
after such issuance. For the purposes of such adjustments, the maximum number of
shares which the holders of any such rights, options, warrants, or convertible
or exchangeable securities shall be entitled to initially subscribe for or
purchase or convert or exchange such securities into shall be deemed to be
issued and outstanding as of the date of such issuance, and the consideration
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received by the Company therefor shall be deemed to be the consideration
received by the Company for such rights, options, warrants, or convertible or
exchangeable securities, plus the minimum aggregate consideration or premiums
stated in such rights, options, warrants, or convertible or exchangeable
securities to be paid for the shares covered thereby. No further adjustment of
the Exercise Price shall be made as a result of the actual issuance of shares of
Common Stock on exercise of such rights, options, or warrants or on conversion
or exchange of such convertible or exchangeable securities. On the expiration or
the termination of such rights, options, or warrants, or the termination of such
right to convert or exchange, the Exercise Price shall be readjusted (but only
with respect to Warrants exercised after such expiration or termination) to such
Exercise Price as would have obtained had the adjustments made upon the issuance
of such rights, options, warrants, or convertible or exchangeable securities
been made upon the basis of the delivery of only the number of shares of Common
Stock actually delivered upon the exercise of such rights, options, or warrants
or upon the conversion or exchange of any such securities; and on any change of
the number of shares of Common Stock deliverable upon the exercise of any such
rights, options, or warrants or conversion or exchange of such convertible or
exchangeable securities or any change in the consideration to be received by the
Company upon such exercise, conversion, or exchange, including, but not limited
to, a change resulting from the antidilution provisions thereof, the Exercise
Price, as then in effect, shall forthwith be readjusted (but only with respect
to Warrants exercised after such change) to such Exercise Price as would have
been obtained had an adjustment been made upon the issuance of such rights,
options, or warrants not exercised prior to such change, or securities not
converted or exchanged prior to such change, on the basis of such change. In
case the Company shall issue shares of Common Stock or any such rights, options,
warrants, or convertible or exchangeable securities for a consideration
consisting, in whole or in part, of property other than cash or its equivalent,
then the "price per share" and the "consideration received by the Company" for
purposes of the first sentence of this Section 5(d) shall be as determined in
good faith by the board of directors of the Company, whose determination shall
be conclusive absent manifest error. Shares of Common Stock owned by or held for
the account of the Company or any majority-owned subsidiary shall not be deemed
outstanding for the purpose of any such computation.
(e) No adjustment in the Exercise Price shall be required if such
adjustment is less than $.05; provided, however, that any adjustments which by
reason of this Section 5 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 5 shall be made to the nearest cent or to the nearest one-thousandth of
a share, as the case may be.
(f) In any case in which this Section 5 shall require that an adjustment in
the Exercise Price be made effective as of a record date for a specified event,
the Company may elect to defer, until the occurrence of such event, issuing to
the Holder, if the Holder exercised this Warrant after such record date, the
shares of Common Stock, if any, issuable upon such exercise over and above the
shares of Common Stock, if any, issuable upon such exercise on the basis of the
Exercise Price in effect prior to such adjustment; provided, however, that the
Company shall
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<PAGE>
deliver to the Holder a due bill or other appropriate instrument evidencing the
Holder's right to receive such additional shares upon the occurrence of the
event requiring such adjustment
(g) Upon each adjustment of the Exercise Price as a result of the
calculations made in Sections 5(b), 5(c) or 5(d) hereof, this Warrant shall
thereafter evidence the right to purchase, at the adjusted Exercise Price, that
number of shares (calculated to the nearest thousandth) obtained by dividing (A)
the product obtained by multiplying the number of shares purchasable upon
exercise of this Warrant prior to adjustment of the number of shares by the
Exercise Price in effect prior to adjustment of the Exercise Price by (B) the
Exercise Price in effect after such adjustment of the Exercise Price.
(h) Whenever there shall be an adjustment as provided in this Section 5,
the Company shall promptly cause written notice thereof to be sent by registered
mail, postage prepaid, to the Holder, at its address as it shall appear in the
Warrant Register, which notice shall be accompanied by an officer's certificate
setting forth the number of Warrant Shares purchasable upon the exercise of this
Warrant and the Exercise Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment and the computation thereof
which officer's certificate shall be conclusive evidence of the correctness of
any such adjustment absent manifest error.
6. (a) In case of any consolidation with or merger of the Company with or
into another corporation (other than a merger or consolidation in which the
Company is the surviving or continuing corporation), or in case of any sale,
lease, or conveyance to another corporation of the property and assets of any
nature of the Company as an entirety or substantially as an entirety, such
successor, leasing, or purchasing corporation, as the case may be, shall (i)
execute with the Holder an agreement providing that the Holder shall have the
right thereafter to receive upon exercise of this Warrant solely the kind and
amount of shares of stock and other securities, property, cash, or any
combination thereof receivable upon such consolidation, merger, sale, lease, or
conveyance by a holder of the number of shares of Common Stock for which this
Warrant; might have been exercised immediately prior to such consolidation,
merger, sale, lease, or conveyance and (ii) make effective provision in its
certificate of incorporation or otherwise, if necessary, to effect such
agreement. Such agreement shall provide for adjustments which shall be as nearly
equivalent as practicable to the adjustments in Section 5.
(b) In case of any reclassification or change of the shares of Common Stock
issuable upon exercise of this Warrant (other than a change in par value or from
no par value to a specified par value, or as a result of a subdivision or
combination, but including any change in the shares into two or more classes or
series of shares), or in case of any consolidation or merger of another
corporation into the Company in which the Company is the continuing corporation
and in which there is a reclassification or change (including a change to the
right to receive cash or other property) of the shares of Common Stock (other
than a change in par value, or from no par value to a specified par value, or as
a result of a subdivision or combination, but including
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<PAGE>
any change in the shares into two or more classes or series of shares), the
Holder shall have the right thereafter to receive upon exercise of this Warrant
solely the kind and amount of shares of stock and other securities, property,
cash, or any combination thereof receivable upon such reclassification, change,
consolidation, or merger by a holder of the number of shares of Common Stock for
which this Warrant might have been exercised immediately prior to such
reclassification, change, consolidation, or merger. Thereafter, appropriate
provision shall be made for adjustments which shall be as nearly equivalent as
practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, leases, or conveyances.
7. In case at any time the Company shall propose
(a) to pay any dividend or make any distribution on shares of Common
Stock in shares of Common Stock or make any other distribution (other than
regularly scheduled cash dividends which are not in a greater amount per
share than the most recent such cash dividend) to all holders of Common
Stock; or
(b) to issue any rights, warrants, or other securities to all holders
of Common Stock entitling them to purchase any additional shares of Common
Stock or any other rights, warrants, or other securities; or
(c) to effect any reclassification or change of outstanding shares of
Common Stock, or any consolidation, merger, sale, lease, or conveyance of
property, described in Section 6; or
(d) to effect any liquidation, dissolution, or winding-up of the
Company; or
(e) to take any other action which would cause an adjustment to the
Exercise Price;
then, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least 15
days prior to (i) the date as of which the holders of record of shares of Common
Stock to be entitled to receive any such dividend, distribution, rights,
warrants, or other securities are to be determined, (ii) the date on which any
such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up is expected to become effective, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of
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<PAGE>
property, liquidation, dissolution, or winding-up, or (iii) the date of such
action which would require an adjustment to the Exercise Price.
8. (a) If at any time prior to the expiration of the Exercise Period, the
Company shall file a registration statement (other than a registration statement
on Form S-4, Form S-8, or any successor form) with the Securities and Exchange
Commission (the "Commission") while any Registrable Securities (as hereinafter
defined) are outstanding, the Company shall give all the then holders of any
Registrable Securities (the "Eligible Holders") at least 30 days prior written
notice of the filing of such registration statement. If requested by any
Eligible Holder in writing within 20 days after receipt of any such notice, the
Company shall, at the Company's sole expense (other than the fees and
disbursements of counsel for the Eligible Holders and the underwriting
discounts, if any, payable in respect of the Registrable Securities sold by any
Eligible Holder), register or qualify all or, at each Eligible Holder's option,
any portion of the Registrable Securities of any Eligible Holders who shall have
made such request, concurrently with the registration of such other securities,
all to the extent requisite to permit the public offering and sale of the
Registrable Securities through the facilities of all appropriate securities
exchanges and the over-the-counter market, and will use its best efforts through
its officers, directors, auditors, and counsel to cause such registration
statement to become effective as promptly as practicable. Notwithstanding the
foregoing, if the managing underwriter of any such offering shall advise the
Company in writing that, in its opinion, the distribution of all or a portion of
the Registrable Securities requested to be included in the registration
concurrently with the securities being registered by the Company would
materially adversely affect the distribution of such securities by the Company
for its own account, then any Eligible Holder who shall have requested
registration of his or its Registrable Securities shall delay the offering and
sale of such Registrable Securities (or the portions thereof so designated by
such managing underwriter) for such period, not to exceed 90 days (the "Delay
Period"), as the managing underwriter shall request, provided that no such delay
shall be required as to any Registrable Securities if any securities of the
Company are included in such registration statement and eligible for sale during
the Delay Period for the account of any person other than the Company and any
Eligible Holder unless the securities included in such registration statement
and eligible for sale during the Delay Period for such other person shall have
been reduced pro rata to the reduction of the Registrable Securities which were
requested to be included and eligible for sale during the Delay Period in such
registration. As used herein' "Registrable Securities" shall mean the Warrants
and the Warrant Shares which, in each case, have not been previously sold
pursuant to a registration statement or Rule 144 promulgated under the Act.
(b) If, at any time prior to the expiration of the Exercise Period, the
Company shall receive a written request, from Eligible Holders who in the
aggregate own (or upon exercise of all Warrants then outstanding or issuable
would own) 50% of the total number of shares of Common Stock then included (or
upon such exercises would be included) in the Registrable Securities (the
"Majority Holders"), to register the sale of all or part of such Registrable
Securities, the Company shall, as promptly as practicable, prepare and file with
the Commission a registration statement sufficient to permit the public offering
and sale of the Registrable
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<PAGE>
Securities through the facilities of all appropriate securities exchanges and
the over-the-counter market, and will use its best efforts through its officers,
directors, auditors, and counsel to cause such registration statement to become
effective as promptly as practicable; provided, however, that the Company shall
only be obligated to file one such registration statement for which all expenses
incurred in connection with such registration (other than the fees and
disbursements of counsel for the Eligible Holders and underwriting discounts, if
any, payable in respect of the Registrable Securities sold by the Eligible
Holders) shall be borne by the Company. The Company shall not be obligated to
effect any registration of its securities pursuant to this Section 8(b) within
six months after the effective date of a previous registration statement
prepared and filed in accordance with Sections 8(a) or 8(b). Within three
business days after receiving any request contemplated by this Section 8(b), the
Company shall give written notice to all the other Eligible Holders, advising
each of them that the Company is proceeding with such registration and offering
to include therein all or any portion of any such other Eligible Holder's
Registrable Securities, provided that the Company receives a written request to
do so from such Eligible Holder within 30 days after receipt by him or it of the
Company's notice.
(c) In the event of a registration pursuant to the provisions of this
Section 8, the Company shall use its best efforts to cause the Registrable
Securities so registered to be registered or qualified for sale under the
securities or blue sky laws of such jurisdictions as the Eligible Holder or such
holders may reasonably request; provided, however, that the Company shall not be
required to qualify to do business in any state by reason of this Section 8(c)
in which it is not otherwise required to qualify to do business.
(d) The Company shall keep effective any registration or qualification
contemplated by this Section 8 and shall from time to time amend or supplement
each applicable registration statement, preliminary prospectus, final
prospectus, application, document, and communication for such period of time as
shall be required to permit the Eligible Holders to complete the offer and sale
of the Registrable Securities covered thereby. The Company shall in no event be
required to keep any such registration or qualification in effect for a period
in excess of nine months from the date on which the Eligible Holders are first
free to sell such Registrable Securities; provided, however, that, if the
Company is required to keep any such registration or qualification in effect
with respect to securities other than the Registrable Securities beyond such
period, the Company shall keep such registration or qualification in effect as
it relates to the Registrable Securities for so long as such registration or
qualification remains or is required to remain in effect in respect of such
other securities.
(e) In the event of a registration pursuant to the provisions of this
Section 8, the Company shall furnish to each Eligible Holder such number of
copies of the registration statement and of each amendment and supplement
thereto (in each case, including all exhibits), such reasonable number of copies
of each prospectus contained in such registration statement and each supplement
or amendment thereto (including each preliminary prospectus), all of which shall
conform to the requirements of the Act and the rules and regulations thereunder,
and such
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<PAGE>
other documents, as any Eligible Holder may reasonably request to facilitate the
disposition of the Registrable Securities included in such registration.
(f) In the event of a registration pursuant to the provisions of this
Section 8, the Company shall furnish each Eligible Holder of any Registrable
Securities so registered with an opinion of its counsel (reasonably acceptable
to the Eligible Holders) to the effect that (i) the registration statement has
become effective under the Act and no order suspending the effectiveness of the
registration statement, preventing or suspending the use of the registration
statement, any preliminary prospectus, any final prospectus, or any amendment or
supplement thereto has been issued, nor has the Commission or any securities or
blue sky authority of any jurisdiction instituted or threatened to institute any
proceedings with respect to such an order, (ii) the registration statement and
each prospectus forming a part thereof (including each preliminary prospectus),
and any amendment or supplement thereto, complies as to form with the Act and
the rules and regulations thereunder, and (iii) such counsel has no knowledge of
any material misstatement or omission in such registration statement or any
prospectus, as amended or supplemented. Such opinion shall also state the
jurisdictions in which the Registrable Securities have been registered or
qualified for sale pursuant to the provisions of Section 8(c).
(g) In the event of a registration pursuant to the provision of this
Section 8, the Company shall enter into a cross-indemnity agreement and a
contribution agreement, each in customary form, with each underwriter, if any,
and, if requested, enter into an underwriting agreement containing conventional
representations, warranties, allocation of expenses, and customary closing
conditions, including, but not limited to, opinions of counsel and accountants'
cold comfort letters, with any underwriter who acquires any Registrable
Securities.
(h) In the event of a registration pursuant to the provisions of this
Section 8:
(i) Each Eligible Holder shall furnish to the Company in writing such
appropriate information (relating to such Eligible Holder and the intention
of such Eligible Holder as to proposed methods of sale or other disposition
of their shares of Common Stock) and the identity of and compensation to be
paid to any proposed underwriters to be employed in connection therewith as
the Company, any underwriter, or the Commission or any other regulatory
authority may request;
(ii) the Eligible Holders shall enter into the usual and customary
form of underwriting agreement agreed to by the Company and any underwriter
with respect to any such offering, if required, and such underwriting
agreement shall contain the customary rights of indemnity between the
Company, the underwriters, and such Eligible Holders;
(iii) each Eligible Holder shall agree that he shall execute, deliver
and/or file with or supply the Company, any underwriters, the Commission
and/or any state or other regulatory authority such information, documents,
representations, undertakings and/or
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agreements necessary to carry out the provisions of the registration
covenants contained in this Section 8 and/or to effect the registration or
qualification of his or its Registrable Securities under the Act and/or any
of the laws and regulations of any state of governmental instrumentality;
(iv) the Company's obligation to include any Registrable Securities in
a registration statement shall be subject to the written agreement of each
holder thereof to offer such securities in the same manner and on the same
terms and conditions as the other securities of the same class are being
offered pursuant to the registration statement, if such shares are being
underwritten;
(v) in the event that all the Registrable Securities have not been
sold on or prior to the expiration of the period specified in Section 8(d)
above, the Company may de-register by post-effective amendment any
Registrable Securities covered by the registration statement, but not sold
on or prior to such date. The Company agrees that it will notify each
holder of Registrable Securities of the filing and effective date of such
post-effective amendment; and
(vi) each Eligible Holder agrees that upon notification by the Company
that the prospectus in respect to any public offering covered by the
provisions hereof is in need of revision, such Eligible Holder shall
immediately upon receipt of such notification (x) cease to offer or sell
any securities of the Company which must be accompanied by such prospectus,
(y) return all such prospectuses in such Eligible Holder's hands to the
Company, and (z) not offer or sell any securities of the Company until such
Holder has been provided with a current prospectus and the Company has
given such Eligible Holder notification permitting such Eligible Holder to
resume offers and sales.
(i) The Company agrees that until all the Registrable Securities have been
sold under a registration statement or pursuant to Rule 144 under the Act, it
shall keep current in filing all reports, statements and other materials
required to be filed with the Commission to permit holders of the Registrable
Securities to sell such securities under Rule 144.
(j) Except for rights granted to holders of the Warrants, the Company will
not, without the written consent of the Majority Holders, grant to any persons
the right to request the Company to register any securities of the Company,
provided that the Company may grant such registration rights to other persons so
long as such rights are subordinate or pari passu to the rights of the Eligible
Holders.
9. (a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each Eligible Holder, its officers, directors,
partners, employees, agents and counsel, and each person, if any, who controls
any such person within the meaning of Section 15 of the Act or Section 20(a) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and
against any and all loss, liability, charge, claim, damage, and expense
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<PAGE>
whatsoever (which shall include, for all purposes of this Section 9, but not be
limited to, attorneys' fees and any and all reasonable expense whatsoever
incurred in investigating, preparing, or defending against any litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation), as and when incurred, arising out of,
based upon, or in connection with: (i) any untrue statement or alleged untrue
statement of a material fact contained (A) in any registration statement,
preliminary prospectus, or final prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, relating to the sale of
any of the Registrable Securities, or (B) in any application or other document
or communication (in this Section 9 collectively called an "application")
executed by or on behalf of the Company or based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order to
register or qualify any of the Registrable Securities under the securities or
blue sky laws thereof or filed with the Commission or any securities exchange;
or (ii) any omission or alleged omission to state a material fact required to be
stated in any document referenced in clause (A) or (B) above or necessary to
make the statements therein not misleading, unless such statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company with respect to such Eligible Holder by or on behalf of such
person expressly for inclusion in any registration statement, preliminary
prospectus, or final prospectus, or any amendment or supplement thereto, or in
any application, as the case may be; or (iii) any breach of any representation,
warranty, covenant, or agreement of the Company contained in this Warrant. The
foregoing agreement to indemnify shall be in addition to any liability the
Company may otherwise have, including liabilities arising under this Warrant.
If any action is brought against any Eligible Holder or any of its
officers, directors, partners, employees, agents, or counsel, or any controlling
persons of such person (an "indemnified party") in respect of which indemnity
may be sought against the Company pursuant to the foregoing paragraph, such
indemnified party or parties shall promptly notify the Company in writing of the
institution of such action (but the failure so to notify shall not relieve the
Company from any liability other than pursuant to this Section 9(a), except to
the extent it may have been prejudiced in any material respect by such failure)
and the Company shall promptly assume the defense of such action, including the
employment of counsel (reasonably satisfactory to such indemnified party or
parties) and payment of expenses. Such indemnified party or parties shall have
the right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless the employment of such counsel shall have been authorized in
writing by the Company in connection with the defense of such action or the
Company shall not have promptly employed counsel reasonably satisfactory to such
indemnified party or parties to have charge of the defense of such action or
such indemnified party or parties shall have reasonably concluded that there may
be one or more legal defenses available to it or them or to other indemnified
parties which are different from or additional to those available to the
Company, in any of which events such fees and expenses shall be borne by the
Company and the Company shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties. Anything in this Section
10 to the contrary notwithstanding, the Company shall not be liable for any
settlement of
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any such claim or action effected without its written consent, which shall not
be unreasonably withheld. The Company shall not, without the prior written
consent of each indemnified party that is not released as described in this
sentence, settle or compromise any action, or permit a default or consent to the
entry of judgment in or otherwise seek to terminate any pending or threatened
action, in respect of which indemnity may be sought hereunder (whether or not
any indemnified party is a party thereto), unless such settlement, compromise,
consent, or termination includes an unconditional release of each indemnified
party from all liability in respect of such action. The Company agrees promptly
to notify the Eligible Holders of the commencement of any litigation or
proceedings against the Company or any of its officers or directors in
connection with the sale of any Registrable Securities or any preliminary
prospectus, prospectus, registration statement, or amendment or supplement
thereto, or any application relating to any sale of any Registrable Securities.
(b) The Holder agrees to indemnify and hold harmless the Company, each
director of the Company, each officer of the Company who shall have signed any
registration statement covering Registrable Securities held by the Holder, each
other person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, and its or their respective
counsel, to the same extent as the foregoing indemnity from the Company to the
Holder in Section 9(a), but only with respect to statements or omissions, if
any, made in any registration statement, preliminary prospectus, or final
prospectus (as from time to time amended and supplemented), or any amendment or
supplement thereto, or in any application, in reliance upon and in conformity
with written information furnished to the Company with respect to the Holder by
or on behalf of the Holder expressly for inclusion in any such registration
statement, preliminary prospectus, or final prospectus, or any amendment or
supplement thereto, or in any application, as the case may be. If any action
shall be brought against the Company or any other person so indemnified based on
any such registration statement, preliminary prospectus, or final prospectus, or
any amendment or supplement thereto, or in any application, and in respect of
which indemnity may be sought against the Holder pursuant to this Section 9(b),
the Holder shall have the rights and duties given to the Company, and the
Company and each other person so indemnified shall have the rights and duties
given to the indemnified parties, by the provisions of Section 9(a).
(c) To provide for just and equitable contribution, if (i) an indemnified
party makes a claim for indemnification pursuant to Section 9(a) or 9(b)
(subject to the limitations thereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Act, the Exchange Act or otherwise, then the
Company (including for this purpose any contribution made by or on behalf of any
director of the Company, any officer of the Company who signed any such
registration statement, any controlling person of the Company, and its or their
respective counsel), as one entity, and the Eligible Holders of the Registrable
Securities included in such registration in the aggregate (including for this
purpose any contribution by or on behalf of an indemnified party), as a second
entity, shall contribute to the
13
<PAGE>
losses, liabilities, claims, damages, and expenses whatsoever to which any of
them may be subject, on the basis of relevant equitable considerations such as
the relative fault of the Company and such Eligible Holders in connection with
the facts which resulted in such losses, liabilities, claims, damages, and
expenses. The relative fault, in the case of an untrue statement, alleged untrue
statement, omission, or alleged omission, shall be determined by, among other
things, whether such statement, alleged statement, omission, or alleged omission
relates to information supplied by the Company or by such `Eligible Holders, and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement, alleged statement, omission, or alleged
omission. The Company and the Holder agree that it would be unjust and
inequitable if the respective obligations of the Company and the Eligible
Holders for contribution were determined by pro rata or per capita allocation of
the aggregate losses, liabilities, claims, damages, and expenses (even if the
Holder and the other indemnified parties were treated as one entity for such
purpose) or by any other method of allocation that does not reflect the
equitable considerations referred to in this Section 9(c). In no case shall any
Eligible Holder be responsible for a portion of the contribution obligation
imposed on all Eligible Holders in excess of its pro rata share based on the
number of shares of Common Stock owned (or which would be owned upon exercise of
the Registrable Securities) by it and included in such registration as compared
to the number of shares of Common Stock owned (or which would be owned upon
exercise of the Registrable Securities) by all Eligible Holders and included in
such registration. No person guilty of a fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who is not guilty of such fraudulent misrepresentation. For purposes
of this Section 9(c), each person, if any, who controls any Eligible Holder
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act
and each officer, director, partner, employee, agent, and counsel of each such
Eligible Holder or control person shall have the same rights to contribution as
such Eligible Holder or control person and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, each officer of the Company who shall have signed any such
registration statement, each director of the Company, and its or their
respective counsel shall have the same rights to contribution as the Company,
subject in each case to the provisions of this Section 9(c). Anything in this
Section 9(c) to the contrary notwithstanding, no party shall be liable for
contribution with respect to the settlement of any claim or action effected
without its written consent. This Section 9(c) is intended to supersede any
right to contribution under the Act, the Exchange Act or otherwise.
10. The issuance of any shares or other securities upon the exercise of
this Warrant, and the delivery of certificates or other instruments representing
such shares or other securities, shall be made without charge to the Holder for
any tax or other charge in respect of such issuance. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of any certificate in a name other
than that of the Holder and the Company shall not be required to issue or
deliver any such certificate unless and until the person or persons requesting
the issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
14
<PAGE>
11. Certificates evidencing the Warrant Shares issued upon exercise of the
Warrants shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
SUCH SHARES MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT,
OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT."
12. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Warrant (and upon surrender of any
Warrant if mutilated), and upon reimbursement of the Company's reasonable
incidental expenses, the Company shall execute and deliver to the Holder thereof
a new Warrant of like date, tenor, and denomination.
13. The Holder of any Warrant shall not have, solely on account of such
status, any rights of a stockholder of the Company, either at law or in equity,
or to any notice of meetings of stockholders or of any other proceedings of the
Company, except as provided in this Warrant.
14. Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested or sent by Federal Express, Express Mail, or similar overnight
delivery or courier service or delivered (in person or by telecopy, telex, or
similar telecommunications equipment) against receipt to the party to whom it is
to be given, if sent to the Company, at: 150 East 58th Street, Suite 3400, New
York, New York 10155, Attention: The Chairman or the Chief Executive Officer; or
if sent to the Holder, at the Holder's address as it shall appear on the Warrant
Register; or to such other address as the party shall have furnished in writing
in accordance with the provisions of this Section 14. Any notice or other
communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party's address which will
be deemed given at the time of receipt thereof. Any notice given by other means
permitted by this Section 14 shall be deemed given at the time of receipt
thereof.
15. This Warrant shall be binding upon the Company and its successors and
assigns and shall inure to the benefit of the Holder and its successors and
assigns.
16. This Warrant shall be construed in accordance with the laws of the
State of New York applicable to contracts made and performed within such State,
without regard to principles of conflicts of law.
15
<PAGE>
17. The Company irrevocably consents to the jurisdiction of the courts of
the State of New York and of any federal court located in such State in
connection with any action or proceeding arising out of or relating to this
Warrant, any document or instrument delivered pursuant to, in connection with or
simultaneously with this Warrant, or a breach of this Warrant or any such
document or instrument. In any such action or proceeding, the Company waives
personal service of any summons, complaint or other process.
Dated: February 10, 1998 COMMODORE APPLIED TECHNOLOGIES, INC.
By: /s/ Michael D. Fullwood
--------------------------------------------
Name: Michael D. Fullwood
Title: Senior Vice President, Chief Financial
and Administrative Officer, Secretary
and General Counsel
16
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, _________________________ hereby sells, assigns, and
transfers unto _____________________ a Warrant to purchase Shares, par value
$.001 per share, of Commodore Applied Technologies, Inc. (the "Company"),
together with all right, title, and interest therein, and does hereby
irrevocably constitute and appoint ____________________ attorney to transfer
such Warrant on the books of the Company, with full power of substitution.
Dated: ___________________________
Signature________________________________
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.
17
<PAGE>
To: Commodore Applied Technologies, Inc.
150 East 58th Street, Suite 3400
New York, New York 10155
ELECTION TO EXERCISE
The undersigned hereby exercises its rights to purchase ______________
Warrant Shares covered by the within warrant and tenders payment herewith in the
amount of $ _____________ in accordance with the terms thereof, and requests
that certificates for such securities be issued in the name of, and delivered
to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated:______________________________ Name ______________________________________
(Print)
Address:________________________________________________________________________
______________________________________
(Signature)
18
<PAGE>
To: Commodore Applied Technologies, Inc.
150 East 58th Street, Suite 3400
New York, New York 10155
NOTICE OF CASHLESS EXERCISE
(To be executed upon exercise of warrant
pursuant to Section 1(b))
The undersigned hereby irrevocably elects to exchange its Warrant for
_______________ Warrant Shares pursuant to the cashless exercise provisions of
the within Warrant, as provided for in Section 1(b) of such Warrant, and
requests that a certificate or certificates for such Warrant Shares be issued
in the name of and delivered to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
which the undersigned is entitled to purchase in accordance with the within
Warrant, that a new Warrant for the balance of the Warrant Shares covered by the
within Warrant be registered in the name of, and delivered to, the undersigned
at the address stated below.
Dated:_______________________________ Name _____________________________________
(Print)
Address:________________________________________________________________________
_____________________________________
(Signature)
(Signature must conform in all
respects to the name of the Holder
as specified on the face of the
Warrant)
19
<PAGE>
COMMON STOCK PURCHASE AGREEMENT
Between
COMMODORE ENVIRONMENTAL SERVICES, INC.
COMMODORE APPLIED TECHNOLOGIES, INC.,
SOUTHBROOK INTERNATIONAL INVESTMENTS,
LTD.,
WESTOVER INVESTMENTS L.P.,
and
MONTROSE INVESTMENTS, LTD.
Dated as of February 9, 1998
<PAGE>
COMMON STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of February 9,
1998, between Commodore Environmental Services, Inc., a Delaware corporation
("COES"), Commodore Applied Technologies, Inc., a Delaware corporation (the
"Company"), and Southbrook International Investment, Ltd. ("Southbrook"),
Montrose Investments, Ltd. ("Montrose") and Westover Investment L.P.
("Westover"). Southbrook, Montrose and Westover are each referred to herein as a
"Purchaser" and are collectively referred to herein as the "Purchasers."
WHEREAS, subject to the terms and conditions set forth in this Agreement,
COES desires to sell to the Purchasers, and the Purchasers desire to purchase
from COES, shares of common stock, $.001 par value per share, of the Company
(the "Common Stock") which are currently owned of record and beneficially by
COES.
NOW THEREFORE, in consideration of the mutual covenants contained in this
Agreement, COES, the Company and each Purchaser agree as follows:
ARTICLE I
PURCHASE AND SALE OF COMMON STOCK
1.1. Purchase and Sale. (a) Subject to the terms and conditions set forth
herein, COES shall sell to the Purchasers, and the Purchasers, severally and not
jointly, shall purchase from COES for $6,000,000 (the "First Tranche Purchase
Price") an amount of Common Stock (the "Initial First Tranche Shares") equal to
6,000,000 divided by 90% of the average closing price of the Common Stock for
the five Trading Days immediately prior to the First Tranche Closing Date (as
defined below), together with any additional shares of Common Stock (the
"Additional First Tranche Shares", and together with the Initial First Tranche
Shares, the "First Tranche Shares"), if any, issued in accordance with Section
1.2(a)(iii) of this Agreement.
(b) Subject to the terms and conditions set forth herein, COES shall have
the right (but not the obligation) to sell to the Purchasers, and the
Purchasers, severally and not jointly, shall purchase from COES for $4,000,000
(the "Second Tranche Purchase Price", and together with the First Tranche
Purchase Price, the "Purchase Price") an amount of Company Common Stock (the
"Initial Second Tranche Shares") equal to 4,000,000 divided by 90% of the
average closing price of the Common Stock for the five Trading Days immediately
prior to the Second Tranche Closing Date (as defined below), together with any
additional shares of Common Stock (the "Additional Second Tranche Shares", and
together with the Initial Second Tranche Shares, the "Second Tranche Shares",
and together with the First Tranche Shares, the "Shares"), if any, issued in
accordance with Section 1.2(b)(iii) of this Agreement.
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<PAGE>
1.2. The Closings.
(a) The Closing for the First Tranche Shares. (i) The closing of the
purchase and sale of the First Tranche Shares (the "First Tranche Closing")
shall take place at the offices of Robinson Silverman Pearce Aronsohn & Berman
LLP ("Escrow Agent"), 1290 Avenue of the Americas, New York, New York 10104,
immediately following the date that the conditions set forth in Section 4.1 have
been satisfied or waived by the appropriate party. The date of the First Tranche
Closing is hereinafter referred to as the "First Tranche Closing Date." At the
First Tranche Closing, COES shall sell and issue to the Purchasers, and the
Purchasers shall, severally and not jointly, purchase from COES the Initial
First Tranche Shares for the First Tranche Purchase Price, all of which shall be
distributed to the parties by Escrow Agent pursuant to the terms of this
Agreement and the Escrow Agreement dated the date hereof among the parties
hereto and Escrow Agent, substantially in the form of Exhibit A attached hereto
(the "Escrow Agreement").
(ii) Prior to the First Tranche Closing: (a) COES shall deliver, or cause
to be delivered, to Escrow Agent (i) one or more stock certificates representing
the Initial First Tranche Shares to be purchased by the Purchasers as set forth
below the Purchaser's names on Schedule 1 attached hereto, each registered in
the name of such Purchaser, together with one or more stock certificates
representing the maximum amount of Additional First Tranche Shares which may be
sold hereunder, (ii) Warrants to purchase an aggregate of 150,000 shares of
Common Stock owned of record and beneficially by COES, at an exercise price per
share equal to the greater of $6.00 or 125% of the per share First Tranche
Closing Price, exercisable for three years from the First Tranche Closing Date,
registered in the names of the Purchasers as set forth in Schedule 1 and in the
form of Exhibit B (the "First Tranche Warrants"), (iii) the legal opinion
referenced in Section 4.1 (b)(iii), substantially in the form attached hereto as
Exhibit C, and (iv) all other documents, instruments and writings required to
have been delivered at or prior to the First Tranche Closing pursuant to this
Agreement and the Registration Rights Agreement, dated the date hereof, by and
between COES, the Company and the Purchasers, in the form of Exhibit D (the
"Registration Rights Agreement") and (a) each Purchaser shall deliver, or cause
to be delivered to Escrow Agent (i) the portion of the First Tranche Purchase
Price set forth next to its name on Schedule 1, in United States dollars in
immediately available funds by wire transfer to an account designated in writing
by Escrow Agent for such purpose on or prior to the First Tranche Closing Date,
and (ii) all documents, instruments and writings required to have been delivered
at or prior to the First Tranche Closing by such Purchaser pursuant to this
Agreement and the Registration Rights Agreement.
(iii) In the event that 90% of the average Per Share Market Value for the
First Tranche Measuring Period ("First Tranche Measuring Period Price") shall be
less than the per share First Tranche Purchase Price, then COES shall issue to
the Purchasers, within three Trading Days following the end of the First Tranche
Measuring Period, in the same proportion as the Initial First Tranche Shares,
for no additional consideration, an amount of additional shares of Company
Common Stock (the "Additional First Tranche Shares") equal to the difference
between (a) the amount equal to 6,000,000 divided by the First Tranche
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<PAGE>
Measuring Period Price and (b) the amount of the Initial First Tranche Shares;
provided, however, that for purposes of such calculation the lowest First
Tranche Measuring Period Price shall be $2.00.
(b) The Closing for the Second Tranche Shares. (i) Subject to the terms and
conditions set forth in this Agreement, COES shall, no earlier than the last day
of the First Tranche Measuring Period and no later than 45 Trading Days
following the end of the First Tranche Measuring Period, have the right and
option (but not the obligation) to deliver a written notice to the Purchasers (a
"Second Tranche Financing Notice") requiring the Purchasers to buy the Initial
Second Tranche Shares. At the Second Tranche Closing (as defined below), each
Purchaser shall be obligated (subject to the terms and conditions herein) to
purchase such portion of such Initial Second Tranche Shares as equals such
Purchaser's pro rata portion of the purchase price for the Initial First Tranche
Shares issued and sold at the First Tranche Closing. The closing of the purchase
and sale of the Second Tranche Shares (the "Second Tranche Closing") shall take
place on the date specified by COES in the Second Tranche Financing Notice which
date shall be between 30 and 45 days after the date of delivery of the Second
Tranche Financing Notice, at the offices of Escrow Agent, but not prior to the
date that the conditions set forth in Section 4.2 have been satisfied or waived
by the appropriate party. The date of the Second Tranche Closing is hereinafter
referred to as the "Second Tranche Closing Date." At the Second Tranche Closing,
COES shall sell and issue to the Purchasers, and the Purchasers shall, severally
and not jointly, purchase from COES the Initial Second Tranche Shares for the
Second Tranche Purchase Price, all of which shall be distributed to the parties
by Escrow Agent pursuant to the terms of this Agreement and the Escrow
Agreement.
(ii) Prior to the Second Tranche Closing, (a) COES shall deliver, or caused
to be delivered, to the Escrow Agent (i) the Initial Second Tranche Shares to be
issued and sold thereat (or such other amount upon which the parties may agree),
registered in the name of the Purchasers (determined by reference to the amount
of Initial First Tranche Shares issued and sold at the First Tranche Closing),
together with one or more stock certificates representing the maximum amount of
Additional Second Tranche Shares which may be sold hereunder, (ii) Warrants to
purchase an aggregate of 100,000 shares of Company Common Stock at an exercise
price per share equal to the greater of $6.00 or 125 % of the per share Second
Tranche Closing Price, exercisable for three years from the Second Tranche
Closing Date, registered in the names of the Purchasers (in the same proportion
as the First Tranche Warrants) and in the form of Exhibit B (the "Second Tranche
Warrants" and together with the First Tranche Warrants, the "Warrants"), (iii)
the legal opinion referenced in Section 4.2(xii), substantially in the form
attached hereto as Exhibit C, and (iv) all other documents, instruments and
writings required to have been delivered at or prior to the Second Tranche
Closing by the Company to the Purchasers pursuant to this Agreement; and (b)
each Purchaser shall deliver, or cause to be delivered, to Escrow Agent (i) its
portion of the Second Tranche Purchase Price (based upon its portion of the
First Tranche Purchase Price) in United States dollars in immediately available
funds by wire transfer to an account designated in writing by Escrow Agent for
such purpose on or prior to the Second Tranche Closing Date and (ii) all
documents,
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<PAGE>
instruments and writings required to have been delivered at or prior to the
Second Tranche Closing by such Purchaser pursuant to this Agreement.
(iii) In the event that 90% of the average Per Share Market Value for the
Second Tranche Measuring Period (the "Second Tranche Measuring Period Price")
shall be less than the per share Second Tranche Purchase Price, then COES shall
issue to the Purchasers, within three Trading Days of the end of the Second
Tranche Measuring Period, in the same proportion as the Initial Second Tranche
Shares, for no additional consideration, an amount of additional shares of
Common Stock (the "Additional Second Tranche Shares") equal to the difference
between (a) the amount equal to 4,000,000 divided by the Second Tranche
Measuring Period Price and (b) the amount of the Initial Second Tranche Shares;
provided, however, that for purposes of such calculation the Second Tranche
Measuring Period Price shall not be below $2.00.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1. Representations, Warranties and Agreements of COES and the Company.
Each of COES and the Company hereby severally, and not jointly and severally,
makes the following representations and warranties to the Purchasers:
(a) Organization and Qualification. Each of COES and the Company is a
corporation, duly incorporated, validly existing and in good standing under
the laws of the State of Delaware, with the requisite corporate power and
authority to own and use its respective properties and assets and to carry
on its respective business as currently conducted. Neither COES nor the
Company has any subsidiaries other than (i) inactive non-operating
subsidiaries or (ii) as set forth in the Form 10-K Annual Report for the
fiscal year ended December 31, 1996 (the "1996 Form 10-K") for each of COES
and the Company (each a "Subsidiary" and collectively the "Subsidiaries").
Each of the Subsidiaries is a corporation, duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the full corporate
power and authority to own and use its properties and assets and to carry
on its business as currently conducted. Each of COES, the Company and their
respective Subsidiaries is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing,
as the case may be, would not, individually or in the aggregate, (x)
adversely affect the legality, validity or enforceability of the Common
Stock or any of the Transaction Documents (as defined below) in any
material respect, (y) have or result in a material adverse effect on the
results of operations, assets, prospects, or financial condition of COES
and its Subsidiaries, taken as a whole, or the Company and its
Subsidiaries, taken as a whole, or (z) adversely impair the ability of COES
or the Company to perform fully on a
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<PAGE>
timely basis their obligations under any Transaction Document (any of (x),
(y) or (z), being a "Material Adverse Effect").
(b) Authorization; Enforcement. Each of COES and the Company
(collectively, the "Corporations") has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by
this Agreement, the Warrants and the Registration Rights Agreement
(collectively, the "Transaction Documents.") and the Intercompany Note, and
otherwise to carry out its obligations hereunder and thereunder. The
execution and delivery of each of the Transaction Documents by the
Corporations and the consummation by each of them of the transactions
contemplated hereby and thereby, including without limitation, the issuance
of the Intercompany Note, have been duly authorized by all necessary action
on the part of each of COES and the Company and no further action is
required by COES or the Company. Each of the Transaction Documents has been
duly executed by COES and the Company, as applicable, and when delivered in
accordance with the terms hereof, will constitute the valid and binding
obligation of COES and the Company, respectively, enforceable against COES
and the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally
the enforcement of, creditors' rights and remedies or by other equitable
principles of general application. Neither COES, the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate of incorporation, by-laws or other charter documents.
(c) Capitalization. The authorized, issued and outstanding capital
stock of each of COES and the Company is set forth in Schedule 2.1(c). No
shares of Common Stock are entitled to preemptive or similar rights, nor is
any holder of the Common Stock entitled to preemptive or similar rights
arising out of any agreement or understanding with the Company by virtue of
any of the Transaction Documents. Except as disclosed in Schedule 2.1(c),
there are no outstanding options, warrants, script rights to subscribe to,
calls or commitments of any character whatsoever relating to, or, except as
a result of the purchase and sale of the Shares and Warrants, securities,
rights or obligations convertible into or exchangeable for, or giving any
Person any right to subscribe for or acquire any shares of Common Stock, or
contracts, commitments, understandings, or arrangements by which COES, the
Company or any Subsidiary is or may become bound to issue additional shares
of Common Stock, or securities or rights convertible or exchangeable into
shares of Common Stock. To the knowledge of COES and the Company, except as
specifically disclosed in the SEC Documents (as defined below) or Schedule
2.1 (c), no Person or group of related Persons beneficially owns (as
determined pursuant to Rule 13d-3 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) or has the right to acquire
by agreement with or by obligation binding upon the Company beneficial
ownership of in excess of 5% of the Common Stock. A "Person" means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other
entity of any kind.
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<PAGE>
(d) Issuance of Shares. Warrants and Warrant Shares. The Shares, the
Warrants and the shares of Common Stock issuable upon exercise of the
Warrants (the "Warrant Shares") are duly authorized and validly issued,
fully paid and nonassessable, and are owned of record and beneficially by
COES free and clear of all liens, encumbrances and rights of first refusal
of any kind (collectively, "Liens"). As at the First Tranche Closing Date
and the Second Tranche Closing Date (each a "Closing Date"), as the case
may be, COES will have, and will at all times while the Warrants are
outstanding own of record and beneficially, an adequate number of shares of
Common Stock to enable it to perform its obligations under this Agreement
and the Warrants with respect to the number of Shares and Warrants to be
issued at such Closing Date and upon exercise of such Warrants. Similarly,
the Company will, at all relevant times, maintain an adequate reserve of
duly authorized shares of Common Stock to enable it to issue fully paid and
nonassessable shares of Common Stock upon exercise of the Warrants in the
event that, for any reason, COES is unable to so issue such Warrant Shares.
The Shares and the Warrant Shares are referred to herein as the
"Transaction Shares."
(e) No Conflicts. The execution, delivery and performance of this
Agreement and the other Transaction Documents and the Intercompany Note by
COES and the Company and the consummation by the COES and Company of the
transactions contemplated hereby and thereby do not and will not (i)
conflict with or violate any provision of their respective certificates of
incorporation, bylaws or other charter documents (each as amended through
the date hereof) or (ii) subject to obtaining the consents referred to in
Section 2.1 (f), conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument (evidencing a COES
debt or a Company debt or otherwise) to which COES or the Company is a
party or by which any property or asset of either COES or the Company is
bound or affected, or (iii) result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which COES or the Company is subject
(including Federal and state securities laws and regulations), or by which
any material property or asset of COES or the Company is bound or affected,
except in the case of each of clauses (ii) and (iii), such conflicts,
defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have or result
in a Material Adverse Effect. The business of each of COES and the Company
is not being conducted in violation of any law, ordinance or regulation of
any governmental authority, except for violations which, individually or in
the aggregate, would not have a Material Adverse Effect.
(f) Consents and Approvals. Except as specifically set forth in
Schedule 2.1(f), neither COES, the Company nor any Subsidiary is required
to obtain any consent, waiver, authorization or order of, give any notice
to, or make any filing or registration with, any court or other Federal,
state, local or other governmental authority or other Person in connection
with the execution, delivery and performance by COES or the Company of the
Transaction Documents, other than (i) the filing of the Registration
Statement, pursuant to the Registration Rights Agreement, with the
Securities and Exchange Commission (the "Commission"), which shall be filed
in accordance with and in the time periods set forth in the
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<PAGE>
Registration Rights Agreement, (ii) the application(s) or any letter(s)
acceptable to the American Stock Exchange ("AMEX") for the listing of the
Transaction Shares with the AMEX (and with any other national securities
exchange or market on which the Common Stock is then listed), (iii) any
filings, notices or registrations under applicable state securities laws,
and (iv) other than, in all other cases, where the failure to obtain such
consent, waiver, authorization or order, or to give such notice or make
such filing or registration would not have or result in, individually or in
the aggregate, a Material Adverse Effect (together with the consents,
waivers, authorizations, orders, notices and filings referred to in
Schedule 2.1(f), the "Required Approvals").
(g) Litigation; Proceedings. Except as specifically disclosed in the
Disclosure Materials (as hereinafter defined) there is no action, suit,
notice of violation, proceeding or investigation pending or, to the
knowledge of COES and the Company, threatened against or affecting COES or
the Company or any of its Subsidiaries or any of their respective
properties before or by any court, governmental or administrative agency or
regulatory authority (Federal, state, county, local or foreign) which (i)
adversely affects or challenges the legality, validity or enforceability of
any of the Transaction Documents or the Common Stock or (ii) could
reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect.
(h) No Default or Violation. Neither COES, the Company nor any
Subsidiary (i) is in default under or in violation of any indenture, loan
or credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound, (ii) is in
violation of any order of any court, arbitrator or governmental body
applicable to it, or (iii) is in violation of any statute, rule or
regulation of any governmental authority to which it is subject, except as
could not reasonably be expected to, in any such case (individually or in
the aggregate) have or result in a Material Adverse Effect.
(i) Schedules. The Schedules to this Agreement furnished by or on
behalf of COES and the Company do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they
were made, not misleading.
(j) Private Offering. Neither COES, the Company nor any Person acting
on its behalf has taken or will take any action which might subject the
offering, issuance or sale of the Securities to the registration
requirements of the Securities Act of 1933, as amended (the "Securities
Act").
(k) SEC Documents; Financial Statements; No Adverse Change. Each of
COES and the Company has filed all reports required to be filed by it under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
including pursuant to Section 13(a) or 15(d) thereof, for the three years
preceding the date hereof (or such shorter period as the Company was
required by law to file such material) (the foregoing materials being
collectively referred to herein as the "SEC Documents" and, together with
the Schedules to this Agreement, the "Disclosure Materials") on a timely
basis or has received a valid extension of such time of
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filing and has filed any such SEC Documents prior to the expiration of any
such extension. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Documents, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
All material agreements to which COES or the Company is a party or to which
the property or assets of COES or the Company are subject have been filed
as exhibits to the SEC Documents as required; neither COES, the Company nor
any of their Subsidiaries is in breach of any agreement where such breach
would have or result in a Material Adverse Effect. The financial statements
of the Company included in the SEC Documents comply in all material
respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time
of filing. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
during the periods involved, except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all
material respects the financial position of COES and the Company as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal
yearend audit adjustments. Since the date of the financial statements
included in the last filed Quarterly Report on Form 10-Q for the period
ended September 30, 1997 for each of COES and the Company, except as
otherwise expressly set forth in Schedule 2.1(k) the Disclosure Schedule,
there has been no event, occurrence or development that has had a Material
Adverse Effect which has not been specifically disclosed to the Purchasers
by COES or the Company. The Company last filed audited financial statements
with the Commission in connection with its 1996 Form 10-K, and has not
received any comments from the Commission in respect thereof.
(l) Investment Company. Neither COES nor the Company is, or is
controlled by or under common control with an affiliate (an "Affiliate")
of, an "investment company" within the meaning of the Investment Company
Act of 1940, as amended.
(m) Certain Fees. Except for fees payable to Avalon Research Group,
Inc. for its services as a finder in the transactions contemplated hereby,
pursuant to an engagement letter previously furnished to the Purchasers
which fees will be paid in accordance with the Escrow Agreement, no fees or
commissions will be payable by COES or the Company to any broker, financial
advisor, finder, investment banker, or bank with respect to the
transactions contemplated by this Agreement. The Purchasers shall have no
obligation with respect to any fees or with respect to any claims made by
or on behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions contemplated by
this Agreement. COES and the Company shall indemnify and hold harmless each
of the Purchasers, its employees, officers, directors, agents, and
partners, and their respective Affiliates (as such term is defined under
Rule 405 promulgated under the Securities Act), from and against all
claims, losses, damages, costs (including the costs of preparation and
attorney's fees) and expenses suffered in respect of any such claimed or
existing fees.
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(n) Solicitation Materials. Neither COES nor the Company has (i)
distributed any offering materials in connection with the offering and sale
of any of the Transaction Shares other than the Disclosure Materials and
any amendments and supplements thereto or (ii) solicited any offer to buy
or sell any of the Transaction Shares by means of any form of general
solicitation or advertising. None of the Disclosure Materials or any other
information provided to the Purchasers by or on behalf of COES or the
Company contain any untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
(o) Form S-3 Eligibility. The Company is, and at each Closing Date
will be, eligible to register securities for resale with the Commission
under Form S-3 promulgated under the Securities Act.
(p) Listing and Maintenance Requirements Compliance. The Company has
not in the two years preceding the date hereof received notice (written or
oral) from the AMEX or any stock exchange, market or trading facility on
which the Common Stock is or has been listed (or on which it has been
quoted) to the effect that the Company is not in compliance with the
listing or maintenance requirements of such exchange or market. The Company
believes that it is in compliance with all such maintenance requirements.
(q) Patents and Trademarks. The Company has, or has rights to use, all
patents, patent applications, trademarks, trademark applications, service
marks, trade names, copyrights, licenses and rights (collectively, the
"Intellectual Property Rights") which are necessary for use in connection
with its business, as currently conducted and as described in the SEC
Documents, and which the failure to so have would have a Material Adverse
Effect. Except as disclosed in Schedule 2.1(s), to the best knowledge of
the Company, there is no existing infringement by another Person of any of
the Intellectual Property Rights which are necessary for use in connection
with the Company's business.
(r) Acknowledgment of Dilution. COES acknowledges that the (i) sale
and issuance of the Shares and (ii) issuance of the Common Stock upon
exercise of the Warrants will result in dilution of the outstanding shares
of Common Stock owned by COES, which dilution may be substantial under
certain market conditions. COES further acknowledges that its obligation to
(x) sell and issue the Shares and (y) issue Common Stock upon exercise of
the Warrants is unconditional and absolute, subject to the limitations set
forth herein or pursuant to the Warrants, regardless of the effect of any
such dilution. COES and the Company further acknowledge that the Purchasers
may sell Shares at any time, including, without limitation, during the
First Tranche Measuring Period and the Second Tranche Measuring Period.
(s) Registration Rights. Rights of Participation. Except as described
on Schedule 2.1(u) hereto, (A) the Company has not granted or agreed to
grant to any Person any rights (including "piggy-back" registration rights)
to have any securities of the Company registered with the Commission or any
other governmental authority which has not been satisfied and (B) no
Person, including, but not limited to, current or former shareholders of
the Company,
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underwriters, brokers or agents, has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by this Agreement or any other Transaction
Document.
(t) Title. Except as disclosed in Schedule 2.1(v), the Company and the
Subsidiaries have good and marketable title in fee simple to all real
property and personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear
of all Liens, except for liens, claims or encumbrances as do not materially
affect the value of such property and do not interfere with the use made
and proposed to be made of such property by the Company and its
Subsidiaries. Any real property and facilities held under lease by the
Company and its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its Subsidiaries.
(u) Regulatory Permits. COES, the Company and their Subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate Federal, state or foreign regulatory authorities necessary to
conduct their respective businesses as described in the SEC Documents
except where the failure to possess such permits would not, individually or
in the aggregate, have a Material Adverse Effect ("Material Permits"), and
neither COES, the Company nor any such Subsidiary has received any notice
of proceedings relating to the revocation or modification of any Material
Permit.
2.2. Representations and Warranties of the Purchasers. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
(a) Organization; Authority. Each Purchaser is a corporation duly
incorporated or a limited partnership duly formed, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
formation with the requisite power and authority, corporate or otherwise,
to enter into and to consummate the transactions contemplated hereby and by
the Registration Rights Agreement and otherwise to carry out its
obligations hereunder and thereunder. The purchase by such Purchaser of the
Shares and the Warrants hereunder has been duly authorized by all necessary
action on the part of such Purchaser. Each of this Agreement and the
Registration Rights Agreement has been duly executed and delivered by such
Purchaser and constitutes the valid and legally binding obligation of such
Purchaser, enforceable against such Purchaser, in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights generally and to general
principles of equity.
(b) Investment Intent. Each Purchaser is acquiring the Shares and the
Warrants for its own account for investment purposes only and not with a
view to or for distributing or reselling such Shares or Warrants or any
part thereof or interest therein, without prejudice, however, to such
Purchaser's right, subject to the provisions of this Agreement and
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the Registration Rights Agreement, at all times to sell or otherwise
dispose of all or any part of such Shares or Warrants pursuant to an
effective registration statement under the Securities Act and in compliance
with applicable State securities laws or under an exemption from such
registration.
(c) Purchaser Status. At the time such Purchaser was offered the
Shares and the Warrants, it was, and at the date hereof, it is, and at each
Closing Date and each exercise date under the Warrants, it will be, an
"accredited investor" as defined in Rule 501(a)(l)-(8) under the Securities
Act.
(d) Experience of Purchaser. Each Purchaser either alone or together
with its representatives, has such knowledge, sophistication and experience
in business and financial matters so as to be capable of evaluating the
merits and risks of the prospective investment in the Shares and the
Warrants, and has so evaluated the merits and risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment. Each Purchaser is
able to bear the economic risk of an investment in the Shares and the
Warrants and, at the present time, is able to afford a complete loss of
such investment.
(f) Access to Information. Each Purchaser acknowledges receipt of the
Disclosure Materials and further acknowledges that it has been afforded (i)
the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms
and conditions of the offering of the Shares and the Warrants and the
merits and risks of investing in the Shares and the Warrants (ii) access to
information about the Company and the Company's financial condition,
results of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
investment and to verify the accuracy and completeness of the information
contained in the Disclosure Materials.
(g) Reliance. Each Purchaser understands and acknowledges that (i) the
Shares and the Warrants are being offered and sold to the Purchaser without
registration under the Securities Act in a private placement that is exempt
from the registration provisions of the Securities Act under Section 4(2)
of the Securities Act or Regulation D promulgated thereunder and (ii) the
availability of such exemption, depends in part on, and the Company will
rely upon the accuracy and truthfulness of, the foregoing representations
and such Purchaser hereby consents to such reliance.
COES and the Company each acknowledge and agree that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
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ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1. Transfer Restrictions. (a) If any Purchaser should decide to dispose
of Shares or any portion of the Warrants held by it, each Purchaser understands
and agrees that it may do so only pursuant to an effective registration
statement under the Securities Act or pursuant to an available exemption from
the registration requirements of the Securities Act. In connection with any
transfer of any Shares or Warrants other than pursuant to an effective
registration statement or to the Company, the Company may require the transferor
thereof to provide to the Company a written opinion of counsel experienced in
the area of United States securities laws selected by the transferor, the form
and substance of which opinion shall be reasonably satisfactory to the Company,
to the effect that such transfer does not require registration of such
transferred securities under the Securities Act. Notwithstanding the foregoing,
the Company hereby consents to and agrees to register (i) any transfer of Shares
or Warrants by one Purchaser to another Purchaser, and agrees that no
documentation other than executed transfer documents shall be required for any
such transfer, and (ii) any transfer of Shares or Warrants by any Purchaser to
an Affiliate of such Purchaser or to an Affiliate of another Purchaser, or any
transfer among any such Affiliates, provided that the transferee certifies to
the Company that it is an "accredited investor" as defined in Rule 501(a) under
the Securities Act. Any such transferee shall be bound by the terms of this
Agreement and shall have the rights of a Purchaser under this Agreement and the
Registration Rights Agreement.
(b) Each Purchaser agrees to the imprinting, so long as is required by this
Section 3.1 (b), of the following legend on the Shares and the Warrants:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE] HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
The Warrant Shares issuable upon exercise of the Warrants shall not contain
the legend set forth above if the exercise of the Warrants occurs at any time
while the Registration Statement filed pursuant to the Registration Rights
Agreement covering the Warrant Shares is effective under the Securities Act or
in the event there is not an effective Registration Statement at such time, if
in the written opinion of counsel to the Company experienced in the area of
United States securities laws such legend is not required under applicable
requirements of the
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Securities Act (including judicial interpretations and pronouncements issued by
the staff of the Commission). The Company agrees that it will provide each
Purchaser, upon request, with a certificate or certificates representing
Transaction Shares, free from such legend at such time as such legend is no
longer required hereunder.
3.2. Stop Transfer Instruction. The Company may not make any notation on
its records or give instructions to any transfer agent of the Company which
enlarge the restrictions of transfer set forth in Section 3.1.
3.3. Furnishing of Information. As long as any Purchaser owns Shares,
Warrants or Transaction Shares, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to
Section 13(a) or 15(d) of the Exchange Act and to promptly furnish the
Purchasers with true and complete copies of all such filings. As long as any
Purchaser owns Shares, Warrants or Transaction Shares, if the Company is not
required to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act,
it will prepare and furnish to the Purchasers and make publicly available in
accordance with Rule 144(c) promulgated under the Securities Act annual and
quarterly financial statements, together with a discussion and analysis of such
financial statements in form and substance substantially similar to those that
would otherwise be required to be included in reports required by Section 13(a)
or 15(d) of the Exchange Act, as well as any other information required thereby,
in the time period that such filings would have been required to have been made
under the Exchange Act. The Company further covenants that it will take such
further action as any holder of Shares may reasonably request, all to the extent
required from time to time to enable such Person to sell Transaction Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act, including
the legal opinion referenced above in this Section. Upon the request of any such
Person, the Company shall deliver to such Person a written certification of a
duly authorized officer as to whether it has complied with such requirements.
3.4. Blue Sky Laws. In accordance with the Registration Rights Agreement,
the Company shall qualify the Transaction Shares under the securities or Blue
Sky laws of such jurisdictions as the Purchasers may request and shall continue
such qualification at all times through the third anniversary of the last
Closing Date; provide, however, that neither the Company nor its Subsidiaries
shall be required in connection therewith to qualify as a foreign corporation
where they are not now so qualified or to take any action that would subject the
Company to general service of process in any such jurisdiction where it is not
then so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
3.5. Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Shares, the Warrants or the Transaction Shares
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in a manner that would require the registration under the Securities Act of the
sale of the Shares, the Warrants or the Transaction Shares to any Purchaser.
3.6. Listing and Reservation of Transaction Shares. (a) The Shares are
listed on the AMEX, and if they should for any reason cease to be so listed, the
Company shall promptly prepare and file with the AMEX (as well as any other
national securities exchange or market on which the Common Stock is then listed)
an additional shares listing application or a letter acceptable to the AMEX
covering and listing a number of shares of Common Stock which is at least equal
to the maximum number of Transaction Shares (ii) take all steps necessary to
cause the Transaction Shares to be approved for listing on the AMEX (as well as
on any other national securities exchange or market on which the Common Stock is
then listed) as soon as possible thereafter, and (iii) provide to the Purchasers
evidence of such listing, and the Company shall maintain the listing of its
Common Stock on such exchange.
(b) The Company shall reserve for issuance upon exercise of the Warrants in
accordance with their terms the number of shares of Common Stock to be listed on
the AMEX (and such other national securities exchange or market on which the
Common Stock is then listed or traded) as set forth in Section 3.7(a). Shares of
Common Stock reserved for issuance upon exercise of the Warrants as set forth in
Section 3.7(a) shall be allocated pro rata to each of the Purchasers in
accordance with the amount of Shares issued and delivered to such Purchaser at
each Closing, as applicable.
3.7. Notice of Breaches. (a) COES, the Company and each Purchaser shall
give prompt written notice to the other of any breach of any representation,
warranty or other agreement contained in this Agreement, the Warrants or in the
Registration Rights Agreement, as well as any events or occurrences arising
after the date hereof and prior to, with respect to the Second Tranche Closing,
the Second Tranche Closing Date, which would reasonably be likely to cause any
representation or warranty or other agreement of such party, as the case may be,
contained herein to be incorrect or breached as of such Closing Date. However,
no disclosure by either party pursuant to this Section 3.7 shall be deemed to
cure any breach of any representation, warranty or other agreement contained
herein or in the Registration Rights Agreement.
(b) Notwithstanding the generality of Section 3.7(a), COES and the Company
shall promptly notify each Purchaser of any notice or claim (written or oral)
that it receives from any lender of COES or the Company to the effect that the
consummation of the transactions contemplated hereby and by the Registration
Rights Agreement violates or would violate any written agreement or
understanding between such lender and COES or the Company, and COES and the
Company shall promptly furnish by facsimile to the holders of the Shares a copy
of any written statement in support of or relating to such claim or notice.
(c) The default by any Purchaser of any of its obligations, representations
or warranties under any Transaction Document shall not be imputed to, and shall
have no effect
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upon, any other Purchaser or affect obligations of COES or the Company under the
Transaction Documents to any non-defaulting Purchaser.
3.8. Exercise Obligations of COES and the Company. COES and the Company
each covenant to deliver Warrant Shares upon exercise of Warrants in accordance
with the terms and conditions and time periods set forth in the Warrants.
3.9. Subsequent Registrations. Other than Transaction Shares and other
"Registrable Securities" (as defined in the Registration Rights Agreement) to be
registered in accordance with the Registration Rights Agreement, or as set forth
on Schedule 3.9 to the Disclosure Schedule, neither COES nor the Company shall,
for a period of not less than 90 Trading Days after the date that the
Transaction Shares Registration Statement relating to the securities issued at
the First Tranche Closing Date and the Second Tranche Closing Date, as the case
may be, is declared effective by the Commission, without the prior written
consent of the Purchasers issue or sell any of equity or equity-equivalent
securities of the Company pursuant to Regulation S promulgated under the
Securities Act. Any days that any Purchaser is unable to sell Transaction Shares
under an Transaction Shares Registration Statement shall be added to such 90
Trading Day period for the purposes of (i) and (ii) above.
3.10. [Intentionally Omitted]
3.11 Use of Proceeds. COES shall, immediately upon receipt of the proceeds
hereunder, lend and advance all such proceeds, net of professional fees and
commissions to Avalon Group, Inc. (the "Net Proceeds"), directly to the Company.
Such loan and advance shall be evidenced by the Company's 8% non-convertible
note payable to COES (the "Intercompany Note"), which shall be payable as to
principal on the earlier to occur of (a) December 31, 1999, or (b) consummation
of any public offering or private placement (other than transactions
contemplated by this Agreement) of securities of the Company with net proceeds
aggregating in excess of $6.0 million, provided, however, that if such funds are
raised in a private placement during the period commencing on the date of this
Agreement and ending on the last day of the Effectiveness Period (as defined in
the Registration Rights Agreement), then the Intercompany Note shall not be
payable unless a Registration Statement filed in accordance with the
Registration Rights Agreement has been effective for 75 consecutive days and is
effective on the date of such repayment. The Company shall use all of the Net
Proceeds received from COES solely for working capital and general corporate
purposes and not for the satisfaction of any portion of Company borrowings,
including, but not limited to, the repayment of any portion of the $4,000,000
currently owed to COES pursuant a prior note issued by the Company to COES (the
"Prior COES Loan"), or to redeem any Company equity or equity-equivalent
securities. Pending application of the proceeds of this placement in the manner
permitted hereby, the Company will invest such proceeds in interest bearing
accounts and/or short-term, investment grade interest bearing securities.
3.11. Reimbursement. In the event that any Purchaser, other than by reason
of its gross negligence or willful misconduct, becomes involved in any capacity
in any action, proceeding
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or investigation brought by or against any person, including stockholders of the
Company, in connection with or as a result of the consummation of the
transactions contemplated pursuant to the Transaction Documents, the Company
will reimburse such Purchaser for its legal and other expenses (including the
cost of any investigation and preparation) incurred in connection therewith. In
addition, with respect to each Purchaser, other than with respect to any matter
in which such Purchaser is a named party, the Company will pay such Purchaser
the charges, as reasonably determined by such Purchaser, for the time of any
officers or employees of such Purchaser devoted to appearing and preparing to
appear as witnesses, assisting in preparing for hearings, trial or pretrial
matters, or otherwise with respect to inquiries, hearings, trials, and other
proceedings relating to the subject matter of this Agreement. The reimbursement
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same terms
and conditions to any affiliate of each Purchaser and partners, directors,
agents, employees and controlling persons (if any), as the case may be, of each
Purchaser and any such affiliate, and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Company, each Purchaser and any such affiliate and any such person. The Company
also agrees that no Purchaser or any such affiliates, partners, directors,
agents, employees or controlling persons shall have any liability to the Company
or any person asserting claims on behalf of or in right of the Company in
connection with or as a result of the consummation of the Transaction Documents
except to the extent that any losses, claims, damages, liabilities or expenses
incurred by the Company result from the gross negligence or willful misconduct
of such Purchaser or entity in connection with the transactions contemplated by
this Agreement.
3.12. Price Protection. In the event that during the period which is 90
days after the end of the First Tranche Measuring Period COES shall sell or the
Company shall issue any shares of Common Stock ("First Future Shares") at a
price per share which shall be less than the per share First Tranche Purchase
Price or during the period which is 90 days after the end of the Second Tranche
Measuring Period COES shall sell or the Company shall issue any shares of Common
Stock ("Second Future Shares") at a price per share which shall be less than the
per share Second Tranche Purchase Price, then the Company shall issue to the
Purchasers, pro rata in accordance with the percentage of Shares issued to the
Purchasers, for no additional consideration, an amount of additional shares of
Common Stock equal to (a) with respect to the First Future Shares, an amount
equal to the difference between (i) 6,000,000 divided by the price at which the
First Future Shares were sold or issued and (ii) the amount equal to the number
of Initial First Tranche Shares sold, and (b) with respect to the Second Future
Shares, an amount equal to the difference between (i) 4,000,000 divided by the
price at which the Second Future Shares were sold or issued and (ii) the amount
equal to the number of Initial Second Tranche Shares sold. If any additional
shares of Shares Common Stock are issued to the Purchasers pursuant to this
Section 3.13 such shares of Common Stock shall be included in the term
"Transaction Shares." Notwithstanding anything to the contrary set forth above,
the terms "First Future Shares" and "Second Future Shares" shall not include any
shares of Common Stock which may be issued in the future upon conversion of, or
pursuant to the terms of any agreement entered into by COES or the Company in
respect of, securities of COES
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and/or the Company which have been issued or entered into and which have been
disclosed in writing to the Purchasers prior to the date of this Agreement.
3.14. Call Protection. COES hereby covenants and agrees that it will not
call the COES Prior Loan or the Intercompany Note during the First Tranche
Measuring Period. COES hereby also covenants and agrees that it will not call
the COES Prior Loan or the Intercompany Note for the period commencing on the
date of the Second Tranche Financing Notice and ending on the 31st day following
the last day of the Second Tranche Measuring Period.
ARTICLE IV
CONDITIONS
4.1. (a) Conditions Precedent to the Obligation of COES to Sell the Initial
First Tranche Shares. The obligation of COES to sell the Initial First Tranche
Shares and the First Tranche Warrants hereunder is subject to the satisfaction
or waiver by COES, at or before the First Tranche Closing, of each of the
following conditions:
(i) Accuracy of the Purchasers' Representations and Warranties. The
representations and warranties of each Purchaser shall be true and correct
in all material respects as of the date when made and as of the First
Tranche Closing Date, as though made on and as of such date;
(ii) Performance by the Purchasers. Each Purchaser shall have
performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Purchaser at or prior to the
First Tranche Closing; and
(iii) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights Agreement
relating to the issuance of any of the Shares or exercise of any of the
First Tranche Warrants.
(iv) Officer's Certificate. On the First Tranche Closing Date, each
Purchaser shall deliver to COES an Officer's Certificate dated the First
Tranche Closing Date and signed by an executive officer of such Purchaser
confirming the accuracy of such Purchasers respective representations,
warranties and covenants as of the First Tranche Closing Date and
confirming the compliance by the Purchasers with the conditions precedent
set forth in this Section 4.1(a) as of the First Tranche Closing Date.
(b) Conditions Precedent to the Obligation of the Purchasers to Purchase
the Initial First Tranche Shares. The obligation of each Purchaser hereunder to
acquire and pay for
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the Initial First Tranche Shares and the First Tranche Warrants is subject to
the satisfaction or waiver by such Purchaser, at or before the First Tranche
Closing, of each of the following conditions:
(i) Accuracy of the Representations and Warranties. The
representations and warranties of COES and of the Company set forth in this
Agreement and in the Registration Rights Agreement shall be true and
correct in all material respects as of the date when made and as of the
First Tranche Closing Date as though made on and as of such date;
(ii) Performance by COES and the Company. Each of COES and the Company
shall have performed, satisfied and complied in all material respects with
all covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by them at or prior to the First
Tranche Closing and shall be able to comply with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or
complied with by them in connection with the Second Tranche Closing;
(iii) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights Agreement
relating to the issuance of any of the Shares or exercise of any of the
First Tranche Warrants;
(iv) Adverse Changes. Since the date of the financial statements
included in the Company's Quarterly Report on Form 10-Q or Annual Report on
Form 10-K, whichever is more recent, last filed prior to the date of this
Agreement, no event which had a Material Adverse Effect and no material
adverse change in the financial condition or prospects of the Company shall
have occurred which is not disclosed in the Disclosure Materials (for
purposes hereof changes in the market price of the Common Stock may be
considered in determining whether there has occurred an event which has had
a Material Adverse Effect or whether a material adverse change has
occurred);
(v) No Suspensions of Trading in Common Stock. The trading in the
Common Stock shall not have been suspended by the Commission or on the AMEX
which suspension shall remain in effect;
(vi) Listing of Common Stock. The Shares shall be listed on the Amex;
(vii) Legal Opinion. COES shall have delivered to the Purchasers the
opinion of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, outside
counsel to the Company, in substantially the form attached hereto as
Exhibit C;
(viii) Required Approvals. All Required Approvals shall have been
obtained other than those relating solely to the Second Tranche Shares;
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(ix) Shares of Common Stock. On or prior to the First Tranche Closing
Date, COES shall own, free and clear of all Liens the maximum number of
Transaction Shares required by the Transaction Documents to be sold by COES
in connection with the First Tranche Closing;
(x) Delivery of Stock Certificates and Warrant Certificates. COES
shall have delivered to Escrow Agent the stock certificate(s) representing
the Initial First Tranche Shares and the warrant certificate(s)
representing First Tranche Warrants, registered in the name of the
Purchasers, together with one or more stock certificates representing the
maximum amount of Additional First Tranche Shares which may be sold
hereunder, each in forms satisfactory to the Purchasers;
(xi) Registration Rights Agreement. Each of COES and the Company shall
have executed and delivered the Registration Rights Agreement;
(xii) Change of Control. No Change of Control (as hereafter defined)
shall have occurred between the date hereof and the First Tranche Closing
Date; and
(xiii) Transfer Agent Instructions. The Irrevocable Transfer Agent
Instructions, in the form of Exhibit D attached hereto, shall have been
delivered to and acknowledged in writing by the Company's transfer agent.
(xiv) Officer's Certificate. On the First Tranche Closing Date, each
of COES and the Company shall deliver to the Purchasers an Officer's
Certificate dated the First Tranche Closing Date and signed by an executive
officer of COES and the Company confirming the accuracy of the
Corporations' respective representations, warranties and covenants as of
the First Tranche Closing Date and confirming the compliance by the
Corporations with the conditions precedent set forth in this Section 4.1(b)
as of the First Tranche Closing Date.
4.2. Conditions Precedent to the Obligation of the Purchasers to Purchase
the Second Tranche Shares. The obligation of each Purchaser hereunder to acquire
and pay for the Initial Second Tranche Shares and the Second Tranche Warrants is
subject to the satisfaction or waiver by each Purchaser, at or before the Second
Tranche Closing, as applicable, of each of the following conditions:
(i) First Tranche Closing and First Tranche Measuring Period. The
First Tranche Closing shall have occurred and the First Tranche Measuring
Period shall be completed;
(ii) Accuracy of the Representations and Warranties. The
representations and warranties of COES and the Company contained herein and
in the Registration Rights Agreement shall be true and correct in all
material respects as of the date when made and as of the Second Tranche
Closing Date, as though made on and as of such date;
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(iii) Performance. Each COES and the Company shall have performed,
satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement and the Registration
Rights Agreement to be performed, satisfied or complied with by them at or
prior to the Second Tranche Closing Date;
(iv) Transaction Shares Registration Statements. The Transaction
Shares Registration Statement with respect to the First Tranche Shares and
shares of Common Stock issuable upon exercise of the First Tranche Warrants
shall have been declared effective under the Securities Act by the
Commission; and on such Closing Date such Transaction Shares Registration
Statement shall be effective, not subject to any stop order for the ninety
(90) days prior to such Closing Date nor subject to any suspension pursuant
to Section 3(p) of the Registration Rights Agreement, and no stop order
shall be pending or threatened as at such Closing Date;
(v) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by any court of governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights Agreement
relating to the issuance of any of the Shares or exercise of any of the
Warrants;
(vi) Adverse Changes. Since the date of the financial statements
included in the Company's Quarterly Report on Form 10-Q or Annual Report on
Form 10-K, whichever is more recent, last filed prior to the date of this
Agreement, no event which had a Material Adverse Effect and no material
adverse change in the financial condition or prospects of the Company shall
have occurred which is not disclosed in the Disclosure Materials (for
purposes hereof changes in the market price of the Common Stock may be
considered in determining whether there has occurred an event which has had
a Material Adverse Effect or whether a material adverse change has
occurred);
(vii) Litigation. No material litigation shall have been instituted
threatened against the Company;
(viii) Management. In the reasonable judgment of each Purchaser, there
have been no substantial changes in the senior management of the Company;
(ix) No Suspensions of Trading in Common Stock. The trading in the
Common Stock shall not have been suspended by the Commission or on the AMEX
(except for any suspension of trading of limited duration solely to permit
dissemination of material information regarding the Company;
(x) Listing of Common Stock. The Common Stock shall have been at all
times since the First Tranche Closing Date, and on the Second Tranche
Closing Date, be listed for trading on the AMEX;
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(xi) Change of Control. No Change of Control in the Company shall have
occurred. "Change of Control" means the occurrence of any of (i) an
acquisition after the date hereof by an individual or legal entity or
"group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange
Act) of in excess of 50% of the voting securities of the Company, (ii) a
replacement of more than one-half of the members of the Company's board of
directors which is not approved by those individuals who are members of the
board of directors on the date hereof in one or a series of related
transactions, (iii) the merger of the Company with or into another entity,
consolidation or sale of all or substantially all of the assets of the
Company in one or a series of related transactions or (iv) the execution by
the Company of an agreement to which the Company is a party or by which it
is bound, providing for any of the events set forth above in (i), (ii) or
(iii);
(xii) Legal Opinion. COES shall have delivered to the Purchasers the
opinions of the Company's outside counsel, in substantially the form
attached hereto as Exhibit C dated the Second Tranche Closing Date;
(xiii) Required Approvals. All Required Approvals shall have been
obtained;
(xiv) Shares of Common Stock. On or prior to the Second Tranche
Closing Date, COES shall own, free and clear of all Liens the maximum
number of Transaction Shares required by the Transaction Documents to be
sold by COES in connection with the Second Tranche Closing;
(xv) Delivery of Stock Certificates and Warrant Certificates. COES
shall have delivered to Escrow Agent the stock certificate(s) representing
the Initial Second Tranche Shares and the warrant certificate(s)
representing Second Tranche Warrants, being purchased at the Second Tranche
Closing, registered in the name of the Purchasers, together with one or
more stock certificates representing the maximum amount of Additional
Second Tranche Shares which may be sold hereunder,, each in forms
satisfactory to the Purchasers;
(xvi) Performance of Exercise Obligations. COES shall have delivered
Warrant Shares upon exercise of the Warrants, if any, and otherwise
performed its obligations in accordance with the terms of the Warrants;
(xvii) Transfer Agent Instructions. The Irrevocable Transfer Agent
Instructions, in the form of Exhibit D attached hereto, shall have been
delivered to and acknowledged in writing by the Company's transfer agent.
(xvii) Market Price. The Market Price on the Second Tranche Closing
date shall be equal or greater than the Market Price on the First Tranche
Closing Date.
(xviii) Officer's Certificate. On the Second Tranche Closing Date,
each of COES and the Company shall deliver to the Purchasers an Officer's
Certificate dated the
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Second Tranche Closing Date and signed by an executive officer of COES and the
Company confirming the accuracy of the Corporations' respective representations,
warranties and covenants as of the Second Tranche Closing Date and confirming
the compliance by the Corporations with the conditions precedent set forth in
this Section 4.2 as of the Second Tranche Closing Date.
ARTICLE V
DAMAGES
If (a) a Registration Statement covering any Transaction Shares required to
be filed pursuant to the Registration Rights Agreement is not filed on or prior
to the Effectiveness Date (as defined in the Registration Rights Agreement)
applicable to such Registration Statement, or (b) the Company fails to file with
the Commission a request for acceleration in accordance with Rule 12d1-2
promulgated under the Securities Exchange Act of 1934, as amended, within five
(5) days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that a Transaction Share Registration
Statement will not be "reviewed," or not subject to further review, or (c) if a
Registration Statement required to be filed pursuant to the Registration Rights
Agreement with respect to the First Tranche Closing is not declared effective by
the Commission on or prior to July 1, 1998 or any other Registration Statement
covering any Transaction Shares required to be filed pursuant to the
Registration Rights Agreement is not declared effective by the Commission on or
prior to the Effectiveness Date applicable to such Registration Statement, or
(d) if any Registration Statement covering any Transaction Shares is filed with
and declared effective by the Commission but thereafter ceases to be effective
as to all Registrable Securities (as defined in the Registration Rights
Agreement) at any time prior to the expiration of the Effectiveness Period (as
defined in the Registration Rights Agreement), without being succeeded within 10
Trading Days by a subsequent Underlying Shares Registration Statement filed with
and declared effective by the Commission, or (e) if trading in the Common Stock
shall be suspended or if the Common Stock is delisted from the AMEX for any
reason for more than three (3) Trading Days in the aggregate, or (f) if the
exercise rights of the Purchasers regarding the Warrants are suspended for any
reason, or (g) if COES or the Company breaches in a material respect any
covenant or other material term or condition of any Transaction Document, and
such breach continues for a period of fifteen (15) days after written notice
thereof to COES and the Company (any such failure or breach being referred to as
an "Event, and for purposes of clauses (a), (c) and (f) the date on which such
Event occurs, or for purposes of clause (b) the date on which such five (5) day
period is exceeded, or for purposes of clause (d) the date which such 10 Trading
Day-period is exceeded, or for purposes of clause (e) the date on which such
three Trading Day period is exceeded, or for clause (g) the date on which such
fifteen (15) day period is exceeded, being referred to as "Event Date"), then
COES and the Company shall, jointly and severally, be responsible for paying the
purchasers (in accordance with their pro rata ownership of the Shares then
outstanding), in cash, as liquidated damages and not as a penalty, $3,000 per
day until such time as the applicable Event is cured.
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The provisions of this Section are in no way exclusive and shall in no way limit
the Company's obligations under the Registration Rights Agreement.
ARTICLE VI
DEFINITIONS
6.1. Definitions. For the purposes hereof, the following terms shall have
the following meanings:
"Market Price" as at any date shall mean the average Per Share Market Value
for the five (5) Trading Days immediately preceding such date.
"First Tranche Measuring Period" shall mean the 75 Trading Day period
commencing immediately following the effective date of the Registration
Statement filed with respect to the First Tranche Closing; provided, however,
that if such Registration Statement is not declared effective within 12 months
following the First Tranche Closing Date, then the First Tranche Measuring
Period shall commence on the date which is 12 months following the First Tranche
Closing Date; provided, further that in case such Transaction Shares
Registration Statement is declared effective prior to April 15, 1998, the "First
Tranche Measuring Period" shall mean the 75 Trading Day period commencing April
15, 1998.
"Second Tranche Measuring Period" shall mean the 75 Trading Day period
commencing immediately following the effective date of the Registration
Statement filed with respect to the Second Tranche Closing; provided, however,
that if such Registration Statement is not declared effective within 12 months
following the Second Tranche Closing Date, then the Second Tranche Measuring
Period shall commence on the date which is 12 months following the Second
Tranche Closing Date.
"Per Share Market Value" on any particular date means (a) the closing bid
price per share of the Common Stock on such date on the AMEX or other stock
exchange or quotation system on which the Common Stock is listed for trading, or
(b) if the Common Stock is not listed on the AMEX or any other stock exchange or
market, the closing bid price per share of the Common Stock on such date on the
over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the
Common Stock is not quoted on the OTC Bulletin Board, the closing bid price per
share of Common Stock on such date on the over-the-counter market as reported by
the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding its functions of reporting prices), or (d) if the Common Stock
is no longer traded on the over-the-counter market and reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
its functions of reporting prices), such closing bid price shall be determined
by reference to "Pink Sheet" quotes for the relevant conversion period as
determined in good faith by the Holder or (c) if the Common Stock is not then
publicly traded, the fair market value of a share of Common Stock as determined
by an appraiser selected
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<PAGE>
in good faith by the Holders of a majority in interest of the Shares (the
Company, after receipt of the determination by such appraiser, shall have the
right to select an additional appraiser, in which case, the fair market value
shall be equal to the average of the determinations by each such appraiser);
provided, that all determinations of the Per Share Market Value shall be
appropriately adjusted for any stock dividends, stock splits or other similar
transactions during such period.
"Trading Day" means (a) a day on which the Common Stock is traded on the
AMEX or other stock exchange or market on which the Common Stock has been
listed, or (b) if the Common Stock is not then listed on the AMEX or any stock
exchange or market, a day on which the Common Stock is traded on the
over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the
Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common
Stock is quoted on the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
its functions of reporting prices); provided, however, that in the event that
the Common Stock is not listed or quoted as set forth in (a), (b) and (c)
hereof, then Trading Day shall mean any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.
ARTICLE VII
MISCELLANEOUS
7.1. Fees and Expenses. The Company shall pay up to $20,000 of the legal
fees of Robinson Silverman Pearce Aronsohn and Berman LLP, the Purchasers
Counsel, in connection with the preparation of the Transaction Documents and for
such counsels representation of the Purchasers in connection with the
transactions contemplated thereby which fees shall be disbursed in accordance
with the terms of the Escrow Agreement, and otherwise, each party shall pay the
fees and expenses of its advisers, counsel, accountants and other experts, if
any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement, as set forth
in the Registration Rights Agreement. COES shall pay all stamp and other taxes
and duties levied in connection with the issuance of the Shares pursuant hereto.
7.2. Entire Agreement: Amendments. This Agreement, together with the
Exhibits and Schedules hereto, the Registration Rights Agreement and the
Warrants contain the entire understanding of the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
oral or written, with respect to such matters.
7.3. Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or
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facsimile (with transmission confirmation report) at the address or number
designated below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day following such
delivery (if delivered on a business day after during normal business hours
where such notice is to be received) or (b) on the second business day following
the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall as set forth below each parties name
on Schedule 1, and if to the Company with copies to Greenberg Traurig Hoffman
Lipoff Rosen & Quentel, 200 Park Avenue, New York, New York 10166, Attn: Stephen
A. Weiss, Esq., fax: (212) 801-6400, and if to any Purchaser with copies to
Robinson Silverman Pearce Aronsohn & Berman LLP, 1290 Avenue of the Americas,
New York, NY 10104, Attn: Kenneth L. Henderson, Esq., fax: (212) 541-4630, or
such other address as may be designated in writing hereafter, in the same
manner, by such person.
7.4. Amendments, Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
each of COES, the Company and the Purchasers; or, in the case of a waiver, by
the party against whom enforcement of any such waiver is sought. No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter. Notwithstanding the
foregoing, no such amendment shall be effective to the extent that it applies to
less than all of the holders of the Shares outstanding. Neither COES nor the
Company shall offer or pay any consideration to a Purchaser for consenting to
such an amendment or waiver unless the same consideration is offered to each
Purchaser and the same consideration is paid to each Purchaser which consents to
such amendment or waiver.
7.5. Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
7.6. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. COES
and the Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of each of the Purchasers. No
Purchaser may assign this Agreement (other than to an Affiliate of such
Purchaser) or any rights or obligations hereunder without the prior written
consent of COES and the Company, except that any Purchaser may assign its rights
hereunder and under the Transaction Documents without the consent of COES or the
Company as long as such assignee demonstrates to the reasonable satisfaction of
COES and the Company its satisfaction of the representations and warranties set
forth in Section 2.2. This provision shall not limit a Purchaser's right to
transfer securities or transfer or assign rights hereunder or under the
Registration Rights Agreement.
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7.7. No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
7.8. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the nonexclusive jurisdiction of the state and Federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
7.9. Survival. The agreements and covenants contained in Article III and
this Article VII shall survive the delivery of the Shares pursuant to this
Agreement and the representations and warranties of COES, Company and the
Purchasers contained in Article II shall survive each Closing hereunder and any
exercise of the Warrants.
7.10. Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
7.11. Publicity. COES, the Company and each Purchaser shall consult with
each other in issuing any press releases or otherwise making public statements
with respect to the transactions contemplated hereby and neither party shall
issue any such press release or otherwise make any such public statement without
the prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which such case the disclosing party shall
provide the other party with prior notice of such public statement. Neither COES
nor the Company shall publicly or otherwise disclose the names of any of the
Purchasers without each such Purchaser's prior written consent.
7.12. Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the
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<PAGE>
parties will attempt to agree upon a valid and enforceable provision which shall
be a reasonable substitute therefor, and upon so agreeing, shall incorporate
such substitute provision in this Agreement.
7.13. Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of COES and the
Company under the Transaction Documents. Each of COES, the Company and the
Purchasers (severally and not jointly) agree that monetary damages would not be
adequate compensation for any loss incurred by reason of any breach of its
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
7.14. Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of the other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any Closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
7.15. No Reliance. Each party acknowledges that (i) it has such knowledge
in business and financial matters as to be fully capable of evaluating this
Agreement, the other Transaction Documents and the transactions contemplated
hereby and thereby, (ii) it is not relying on any advice or representation of
the other party in connection with entering into this Agreement, the other
Transaction Documents or such transactions (other than the representations made
in this Agreement or the other Transaction Documents), (iii) it has not received
from such party any assurance or guarantee as to the merits (whether legal,
regulatory, tax, financial or otherwise) of entering into this Agreement or the
other Transaction Documents or the performance of its obligations hereunder and
thereunder, and (iv) it has consulted with its own legal, regulatory, tax,
business, investment, financial and accounting advisors to the extent that it
has deemed necessary, and has entered into this Agreement and the other
Transaction Documents based on its own independent judgment and on the advice of
its advisors as it has deemed necessary, and not on any view (whether written or
oral) expressed by such party.
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IN WITNESS WHEREOF, the parties hereto have caused this Common Stock
Purchase Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
COMMODORE ENVIRONMENTAL SERVICES, INC.
By: /s/ Michael D. Fullwood
---------------------------------------------
Name: Michael D. Fullwood
Title: Senior Vice President, Chief Financial
and Administrative Officer, Secretary
and General Counsel
COMMODORE APPLIED TECHNOLOGIES, INC.
By: /s/ Paul E. Hannesson
---------------------------------------------
Name: Paul E. Hannesson
Title: President and Chief Executive Officer
SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD.
By: /s/ Kenneth L. Hudson
---------------------------------------------
Name: Kenneth L. Hudson
Title: Attorney-in-fact
WESTOVER INVESTMENTS L.P.
By: /s/ William E. Rose
---------------------------------------------
Name: William E. Rose
Title: Authorized Signatory
MONTROSE INVESTMENTS, LTD.
By: /s/ William E. Rose
---------------------------------------------
Name: William E. Rose
Title: Authorized Signatory
<PAGE>
Schedule 1
Company:
Commodore Environmental Services, Inc.
150 East 58th Street,
New York, New York 10155
Attn: Bentley J. Blum.,
and Michael D. Fullwood, Senior Vice President
Purchasers:
Southbrook International Investments, Ltd.
c/o Trippoak Advisors, Inc.
630 Fifth Avenue, Suite 2000
New York, NY 10111
Attn: Robert L. Miller
Fax: (212) 332-3256
Portion of First Tranche Purchase Price - $3,000,000
First Tranche Shares _ 690,846
Number of Shares underlying
First Tranche Warrant - 75,000
Westover Investments L.P.
777 Main Street, Suite 2750
Fort Worth, Texas 76102
Attn: Will Rose
Fax: (817) 870-6190
Portion of First Tranche Purchase Price - $1,050,000
First Tranche Shares 241,796
Number of Shares underlying
First Tranche Warrant - 26,250
Montrose Investments, Ltd.
777 Main Street, Suite 2750
Fort Worth, Texas 76102
Attn: Will Rose
Fax: (817) 870-6190
Portion of First Tranche Purchase Price - $1,950,000
First Tranche Shares 449,050
Number of Shares underlying
First Tranche Warrant - 48,750
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of February 9, 1998, among Commodore Environmental Services, Inc., a
Delaware corporation ("COES"), Commodore Applied Technologies, Inc., a Delaware
corporation (the "Company"), Southbrook International Investments, Ltd.
("Southbrook"), Montrose Investments, Ltd. ("Montrose") and Westover Investment
L.P. ("Westover"). Southbrook, Montrose and Westover are each referred to herein
as a "Purchaser" and are collectively referred to herein as the "Purchasers."
This Agreement is made pursuant to the Common Stock Purchase Agreement,
dated as of the date hereof among COES, the Company and the Purchasers (the
"Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Purchase Agreement. As used in this Agreement,
the following terms shall have the following meanings:
"Advice" shall have meaning set forth in Section 3(o).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of
New York generally are authorized or required by law or other government actions
to close.
"Closing Date" shall have the meaning set forth in the Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, $.OO1 par value.
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"Effectiveness Date" means (i) with respect to the Registration Statement
to be filed with respect to the First Tranche Closing, June 15, 1998 and (ii)
with respect to the Registration Statement to be filed with respect to the
Second Tranche Closing, the 90th day following the Second Tranche Closing Date,
or, if such day is not a Business Day, the Effectiveness Date shall be the next
succeeding Business Day.
"Effectiveness Period" shall have the meaning set forth in Section 2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Filing Date" means (i) with respect to the First Tranche Shares, April 15,
1998 and (ii) with respect to the Second Tranche Shares 30 days following the
Second Tranche Closing Date.
"First Tranche Warrant Shares" means the Common Stock issuable upon
exercise of the First Tranche Warrants.
"Holder" or "Holders" means the holder or holders, as the case may be, from
time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 5(c).
"Indemnifying Party" shall have the meaning set forth in Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Maximum Additional First Tranche Shares" means the maximum amount of
Additional First Tranche Shares which may be sold pursuant to Section 1.
2(a)(iii) of the Purchase Agreement.
"Maximum Additional Second Tranche Shares" means the maximum amount of
Additional Second Tranche Shares which may be sold pursuant to Section 1
.2(b)(iii) of the Purchase Agreement.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A
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promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Securities covered by the Registration Statement, and all
other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference in such Prospectus.
"Registrable Securities" means (a) with respect to the Registration
Statement to be filed after the First Tranche Closing, (i) the First Tranche
Shares, (ii) the First Tranche Warrant Shares, and (iii) the Maximum Additional
First Tranche Shares and (b) with respect to the Registration Statement to be
filed after the Second Tranche Closing, (i) the Second Tranche Shares, (ii) the
Second Tranche Warrant Shares, and (iii) the Maximum Additional Second Tranche
Shares.
"Registration Statement" means the registration statements and any
additional registration statements contemplated by Section 2(a), including (in
each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference in such
registration statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Second Tranche Warrant Shares" means the Common Stock issuable upon
exercise of the Second Tranche Warrants.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means one special counsel to the Holders, for which the
Holders will be reimbursed by the Company and/or COES pursuant to Section 4.
"Underwritten Registration or Underwritten Offering" means a registration
in connection with which securities of the Company are sold to an underwriter
for reoffering to the public pursuant to an effective registration statement.
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2. Shelf Registration
(a) On or prior to each applicable Filing Date, the Company shall prepare
and file with the Commission a "Shelf" Registration Statement covering all
Registrable Securities for an offering to be made on a continuous basis pursuant
to Rule 415. The Registration Statement shall be on Form S-3 (except if
otherwise directed by the Holders of a majority in interest of the applicable
Registrable Securities in accordance herewith or if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3, in which
case such registration shall be on another appropriate form in accordance
herewith). The Registration Statement shall state, to the extent permitted by
Rule 416 under the Securities Act, that it also covers such indeterminate number
of shares of Common Stock as may be required for the exercise of the Warrants in
full to prevent dilution resulting from stock splits, stock dividends or similar
events, or by reason of changes in the Exercise Price (as defined in the
Warrants) in accordance with the terms of the Warrants. The Company shall (i)
not permit any securities other than the Registrable Securities and those
securities listed in Schedule 2.1(u) of the Purchase Agreement to be included in
the Registration Statement and (ii) use its commercially reasonable efforts to
cause the Registration Statement to be declared effective under the Securities
Act as promptly and as possible after the filing thereof, but in any event prior
to the Effectiveness Date, and to keep such Registration Statement continuously
effective under the Securities Act until the date which is two years after the
date that such Registration Statement is declared effective by the Commission or
such earlier date when all Registrable Securities covered by such Registration
Statement have been sold or may be sold without volume restrictions pursuant to
Rule 144 as determined by the counsel to the Company pursuant to a written
opinion letter, addressed to the Company's transfer agent to such effect (the
"Effectiveness Period").
(b) If the Holders of a majority of the Registrable Securities so elect, an
offering of Registrable Securities pursuant to the Registration Statement may be
effected on no more than two occasions in the form of an Underwritten Offering.
In such event, and if the managing underwriters advise the Company and such
Holders in writing that in their opinion the amount of Registrable Securities
proposed to be sold in such Underwritten Offering exceeds the amount of
Registrable Securities which can be sold in such Underwritten Offering, there
shall be included in such Underwritten Offering the amount of such Registrable
Securities which in the opinion of such managing underwriters can be sold, and
such amount shall be allocated pro rata among the Holders proposing to sell
Registrable Securities in such Underwritten Offering.
(c) If any of the Registrable Securities are to be sold in an Underwritten
Offering, the investment banker in interest that will administer such offering
will be selected by the Holders of a majority of the Registrable Securities
included in such offering provided that the Company shall consent to the
inclusion of such investment banker, which consent shall not be unreasonably
withheld. No Holder may participate in any Underwritten Offering hereunder
unless such Holder (i) agrees to sell its Registrable Securities on the basis
provided in any underwriting agreements approved by the Persons entitled
hereunder to approve such
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arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such arrangements.
3. Registration Procedures
In connection with the Company's registration obligations hereunder, the
Company shall:
(a) Prepare and file with the Commission on or prior to each applicable
Filing Date, a Registration Statement on Form S-3 (or if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3 such
registration shall be on another appropriate form in accordance herewith, or, in
connection with an Underwritten Offering hereunder, such other form agreed to by
the Company and by a majority-in-interest of Holders of Registrable Securities)
in accordance with the method or methods of distribution thereof as specified by
the Holders (except if otherwise directed by the Holders), and cause the
Registration Statement to become effective and remain effective as provided
herein; provided, however, that not less than five (5) Business Days prior to
the filing of the Registration Statement or any related Prospectus or any
amendment or supplement thereto (including any document that would be
incorporated therein by reference), the Company shall, if reasonably practicable
(i) furnish to the Holders, their Special Counsel and any managing underwriters,
copies of all such documents proposed to be filed, which documents (other than
those incorporated by reference) will be subject to the review of such Holders,
their Special Counsel and such managing underwriters, and (ii) cause its
officers and directors, counsel and independent certified public accountants to
respond to such inquiries as shall be necessary, in the reasonable opinion of
respective counsel to such Holders and such underwriters, to conduct a
reasonable investigation within the meaning of the Securities Act. The Company
shall not file the Registration Statement or any such Prospectus or any
amendments or supplements thereto to which the Holders of a majority of the
Registrable Securities, their Special Counsel, or any managing underwriters,
shall reasonably object in writing within three (3) Business Days of their
receipt thereof.
(b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement as may be necessary to
keep the Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period and prepare and file with
the Commission such additional Registration Statements in order to register for
resale under the Securities Act all of the Registrable Securities; (ii) cause
the related Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to Rule 424
(or any similar provisions then in force) promulgated under the Securities Act;
(iii) respond as promptly as reasonably possible to any comments received from
the Commission with respect to the Registration Statement or any amendment
thereto and as promptly as reasonably possible provide the Holders true and
complete copies of all correspondence from and to the Commission relating to the
Registration Statement; and (iv) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration Statement
during the applicable period in accordance with the
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intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold, their Special
Counsel and any managing underwriters as promptly as reasonably possible (and,
in the case of (i)(A) below, not less than five (5) days prior to such filing)
and (if requested by any such Person) confirm such notice in writing no later
than one (1) Business Day following the day (i)(A) when a Prospectus or any
Prospectus supplement or post-effective amendment to the Registration Statement
is proposed to be filed; (B) when the Commission notifies the Company whether
there will be a review" of such Registration Statement and whenever the
Commission comments in writing on such Registration Statement and (C) with
respect to the Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information; (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) if at any time any of the
representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(d) Use its best efforts to avoid the issuance of, or, if issued, obtain
the withdrawal of (i) any order suspending the effectiveness of the Registration
Statement or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(e) If requested by any managing underwriter or the Holders of a majority
in interest of the Registrable Securities to be sold in connection with an
Underwritten Offering, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as the
Company reasonably agrees should be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective amendment;
provided, however, that the Company shall not be required to take any action
pursuant to this Section 3(e) that would, in the opinion of counsel for the
Company, violate applicable law or be materially detrimental to the business
prospects of the Company.
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(f) Furnish to each Holder, their Special Counsel and any managing
underwriters, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by
reference, and all exhibits to the extent requested by such Person (including
those previously furnished or incorporated by reference) promptly after the
filing of such documents with the Commission.
(g) Promptly deliver to each Holder, their Special Counsel, and any
underwriters, without charge, as many copies of the Prospectus or Prospectuses
(including each form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request; and the Company hereby consents to the use
of such Prospectus and each amendment or supplement thereto by each of the
selling Holders and any underwriters in connection with the offering and sale of
the Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable Securities, use its best
efforts to register or qualify or cooperate with the selling Holders, any
underwriters and their Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder or underwriter
requests in writing, to keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period and to do any and
all other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the Registrable Securities covered by a Registration
Statement; provided, however, that the Company shall not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or to take any action that would subject it to general service of process in any
such jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
(i) Cooperate with the Holders and any managing underwriters to facilitate
the timely preparation and delivery of certificates representing Registrable
Securities to be delivered to a transferee pursuant to a Registration Statement,
which certificates shall be free, to the extent permitted by applicable law, of
all restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such managing underwriters or
Holders may request at least two Business Days prior to any sale of Registrable
Securities.
(j) Upon the occurrence of any event contemplated by Section 3(c)(vi), as
promptly as reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
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(k) Use its best efforts to cause all Registrable Securities relating to
such Registration Statement to be listed on the American Stock Exchange and any
other securities exchange, quotation system, market or over-the-counter bulletin
board, if any, on which similar securities issued by the Company are then listed
as and when required pursuant to the Purchase Agreement.
(l) Enter into such agreements (including an underwriting agreement in
form, scope and substance as is customary in Underwritten Offerings) and take
all such other actions in connection therewith (including those reasonably
requested by any managing underwriters and the Holders of a majority of the
Registrable Securities being sold) in order to expedite or facilitate the
disposition of such Registrable Securities, and whether or not an underwriting
agreement is entered into, (i) make such representations and warranties to such
Holders and such underwriters as are customarily made by issuers to underwriters
in underwritten public offerings, and confirm the same if and when requested;
(ii) in the case of an Underwritten Offering obtain and deliver copies thereof
to the managing underwriters, if any, of opinions of counsel to the Company and
updates thereof addressed to each such underwriter, in form, scope and substance
reasonably satisfactory to any such managing underwriters and Special Counsel to
the selling Holders covering the matters customarily covered in opinions
requested in Underwritten Offerings and such other matters as may be reasonably
requested by such Special Counsel and underwriters; (iii) immediately prior to
the effectiveness of the Registration Statement, and, in the case of an
Underwritten Offering, at the time of delivery of any Registrable Securities
sold pursuant thereto, use its best reasonable efforts to obtain and deliver
copies to the Holders and the managing underwriters, if any, of "cold comfort"
letters and updates thereof from the independent certified public accountants of
the Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired by the
Company for which financial statements and financial data is, or is required to
be, included in the Registration Statement), addressed to the Company in form
and substance as are customary in connection with Underwritten Offerings; (iv)
if an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable to the selling
Holders and the underwriters, if any, than those set forth in Section 6 (or such
other provisions and procedures acceptable to the managing underwriters, if any,
and holders of a majority of Registrable Securities participating in such
Underwritten Offering); and (v) deliver such documents and certificates as may
be reasonably requested by the Holders of a majority of the Registrable
Securities being sold, their Special Counsel and any managing underwriters to
evidence the continued validity of the representations and warranties made
pursuant to clause 3(l)(i) above and to evidence compliance with any customary
conditions contained in the underwriting agreement or other agreement entered
into by the Company.
(m) Make available for inspection by the selling Holders, any
representative of such Holders, any underwriter participating in any disposition
of Registrable Securities, and any attorney or accountant retained by such
selling Holders or underwriters, at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and cause the
officers, directors, agents and employees of the Company and its subsidiaries to
supply all information in each case reasonably requested by any such Holder,
representative, underwriter, attorney or
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accountant in connection with the Registration Statement; provided, however,
that any information that is determined in good faith by the Company in writing
to be of a confidential nature at the time of delivery of such information shall
be kept confidential by such Persons, unless (i) disclosure of such information
is required by court or administrative order or is necessary to respond to
inquiries of regulatory authorities; (ii) disclosure of such information, in the
opinion of counsel to such Person, is required by law; (iii) such information
becomes generally available to the public other than as a result of a disclosure
or failure to safeguard by such Person; or (iv) such information becomes
available to such Person from a source other than the Company and such source is
not known by such Person to be bound by a confidentiality agreement with the
Company.
(n) Comply in all material respects with all applicable rules and
regulations of the Commission.
(o) The Company may require each selling Holder to furnish to the Company
information regarding such Holder and the distribution of such Registrable
Securities as is required by law to be disclosed in the Registration Statement,
and the Company may exclude from such registration the Registrable Securities of
any such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
If the Registration Statement refers to any Holder by name or otherwise as
the holder of any securities of the Company, then such Holder shall have the
right to require (if such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar Federal statute then in force) the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any Registrable
Securities under the Registration Statement until it has received copies of the
Prospectus as then amended or supplemented as contemplated in Section 3(g) and
notice from the Company that such Registration Statement and any post-effective
amendments thereto have become effective as contemplated by Section 3(c) and
(ii) it and its officers, directors or Affiliates, if any, will comply with the
prospectus delivery requirements of the Securities Act as applicable to them in
connection with sales of Registrable Securities pursuant to the Registration
Statement.
Each Holder agrees by its acquisition of such Registrable Securities that,
upon receipt of a notice from the Company of the occurrence of any event of the
kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi),
such Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(j), or until it is advised in writing (the "Advice")
by the Company that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.
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4. Registration Expenses
(a) All fees and expenses incident to the performance of or compliance with
this Agreement by the Company, except as and to the extent specified in Section
4(b), shall be borne by the Company whether or not pursuant to an Underwritten
Offering and whether or not the Registration Statement is filed or becomes
effective and whether or not any Registrable Securities are sold pursuant to the
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the American Stock Exchange and each other securities
exchange or market on which Registrable Securities are required hereunder to be
listed and (B) in compliance with state securities or Blue Sky laws (including,
without limitation, fees and disbursements of counsel for the Holders in
connection with Blue Sky qualifications or exemptions of the Registrable
Securities and determination of the eligibility of the Registrable Securities
for investment under the laws of such jurisdictions as the managing
underwriters, if any, or the Holders of a majority of Registrable Securities may
designate)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses if
the printing of prospectuses is requested by the managing underwriters, if any,
or by the holders of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Company, COES and Special Counsel for
the Holders, (v) Securities Act liability insurance, if the Company so desires
such insurance, and (vi) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions contemplated by
this Agreement. In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
(b) If the Holders require an Underwritten Offering pursuant to the terms
hereof, the Company shall be responsible for all costs, fees and expenses in
connection therewith, except for the fees and disbursements of the Underwriters
(including any underwriting commissions and discounts) and their legal counsel
and accountants (which shall be borne by the Holders). Therefore, in such
circumstances, the Holder shall bear the expenses of the fees and disbursements
of any legal counsel or accounting firm retained by the underwriters in
connection with such Underwritten Offering and the costs of any determination
(but not filing) by the underwriters of the eligibility of the Registrable
Securities for investment under the applicable state securities laws. By way of
illustration which is not intended to diminish from the provisions of Section
4(a), the Holders shall not be responsible for, and the Company shall be
required to pay the fees or disbursements incurred by the Company (including by
its legal counsel and accountants) in connection with, the preparation and
filing of a Registration Statement and related Prospectus for such offering, the
maintenance of such Registration Statement in accordance with the terms hereof,
the listing of the Registrable Securities in accordance with the requirements
hereof, and printing expenses incurred to comply with the requirements hereof.
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5. Indemnification
(a) Indemnification by the Company. The Company and COES shall,
notwithstanding any termination of this Agreement, jointly and severally,
indemnify and hold harmless each Holder, the officers, directors, agents
(including any underwriters retained by such Holder in connection with the offer
and sale of Registrable Securities), brokers (including brokers who offer and
sell Registrable Securities as principal as a result of a pledge or any failure
to perform under a margin call of Common Stock), investment advisors and
employees of each of them, each Person who controls any such Holder (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, costs of preparation and attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or relating to any untrue
or alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading (in the case of any
Prospectus or form of Prospectus or supplement thereto, in light of the
circumstances under which they were made), except to the extent, but only to the
extent, that such untrue statements or omissions are based solely upon
information regarding such Holder furnished in writing to the Company by such
Holder expressly for use therein, which information or omission was reasonably
relied on by the Company for use therein or to the extent that such information
or omission relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto.
The Company and/or COES shall notify the Holders promptly of the institution,
threat or assertion of any Proceeding of which the Company and/or COES is aware
in connection with the transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, the directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of or based solely upon any untrue
statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising solely out of or based solely upon any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such Holder to the Company specifically for inclusion therein the Registration
Statement or such Prospectus and that such information was
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<PAGE>
reasonably relied upon by the Company for use in the Registration Statement,
such Prospectus or such form of prospectus or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus, or in any amendment or supplement
thereto. In no event shall the liability of any selling Holder hereunder be
greater in amount than the dollar amount of the net proceeds received by such
Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in any
such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable fees
and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within 10 Business
Days of written notice thereof to the Indemnifying Party (regard
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<PAGE>
less of whether it is ultimately determined that an Indemnified Party is not
entitled to indemnification hereunder; provided, that the Indemnifying Party may
require such Indemnified Party to undertake to reimburse all such fees and
expenses to the extent it is finally judicially determined that such Indemnified
Party is not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a) or 5(b)
is unavailable to an Indemnified Party because of a failure or refusal of a
governmental authority to enforce such indemnification in accordance with its
terms (by reason of public policy or otherwise), then each Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been taken
or made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 5(c), any
reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6. Rule 144
As long as any Holder owns Transaction Shares (as such term is defined in
the Purchase Agreement), the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the
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<PAGE>
Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange
Act. As long as any Holder owns Transaction Shares prior to the date on which
all Holders may resell all of its Transaction Shares without volume restrictions
pursuant to Rule 144(k) promulgated under the Securities Act (as determined by
counsel to the Company pursuant to a written opinion letter to such effect,
addressed and acceptable to the Company's transfer agent for the benefit of and
enforceable by any holder thereof), if the Company is not required to file
reports pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare
and furnish to the Holders and make publicly available in accordance with Rule
144(c) promulgated under the Securities Act annual and quarterly financial
statements, together with a discussion and analysis of such financial statements
in form and substance substantially similar to those that would otherwise be
required to be included in reports required by Section 13(a) or 15(d) of the
Exchange Act, as well as any other information required thereby, in the time
period that such filings would have been required to have been made under the
Exchange Act. The Company further covenants that it will take such further
action as any Holder may reasonably request, all to the extent required from
time to time to enable such Person to sell Transaction Shares without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act, including providing
any legal opinions referred to in the Purchase Agreement. Upon the request of
any Holder, the Company shall deliver to such Holder a written certification of
a duly authorized officer as to whether it has complied with such requirements.
7. Miscellaneous
(a) Remedies. In the event of a breach by the Company, COES or by a Holder,
of any of their obligations under this Agreement, each Holder, COES or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company, COES and each Holder agree that monetary damages would not provide
adequate compensation for any losses incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby further agrees that, in the event
of any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has, as of the date hereof, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
Except as disclosed in Schedule 2.1(s) of the Purchase Agreement, neither the
Company nor any of its subsidiaries has previously entered into any agreement
granting any registration rights with respect to any of its securities to any
Person. Without limiting the generality of the foregoing, without the written
consent of the Holders of a majority of the then outstanding Registrable
Securities, the Company shall not grant to any Person the right to request the
Company to register any securities of the Company under the Securities Act
unless the rights so granted are subject in all respects to the prior rights in
full of the Holders set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement.
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<PAGE>
(c) No Piggyback on Registrations. Neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant hereto or as
disclosed in Schedule 2.1(s) of the Purchase Agreement may include securities of
the Company in the Registration Statement other than the Registrable Securities
or as disclosed in Schedule 2.1(u) of the Purchase Agreement, and the Company
shall not after the date hereof enter into any agreement providing any such
right to any of its security holders.
(d) Piggy-Back Registrations. If at any time when there is not an effective
Registration Statement covering all of the Registrable Securities, the Company
shall determine to prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than on Form 8-4 or Form
8-8 (each as promulgated under the Securities Act) or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, the Company shall
send to each holder of Registrable Securities written notice of such
determination and, if within twenty (20) days after receipt of such notice, any
such holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
holder requests to be registered; provided, however, that the Company shall not
be required to register any Registrable Securities pursuant to this Section 7(d)
that are eligible for sale pursuant to Rule 144(k) of the Commission. In the
case of an underwritten public offering, if the managing underwriter(s) or
underwriter(s) should reasonably object to the inclusion of the Registrable
Securities in such registration statement, then if the Company, after
consultation with the Underwriter's Representative, should reasonably determine
that the inclusion of such Registrable Securities would materially adversely
affect the offering contemplated in such registration statement, and based on
such determination recommends inclusion in such registration statement of fewer
or none of the Registrable Securities of the Holders, then (x) the number of
Registrable Securities of the Holders included in such registration statement
shall be reduced pro-rata among such Holders (based upon the number of
Registrable Securities requested to be included in the registration), if the
Company after consultation with the underwriter(s) recommends the inclusion of
fewer Registrable Securities, or (y) none of the Registrable Securities of the
Holders shall be included in such registration statement, if the Company after
consultation with the underwriter(s) recommends the inclusion of none of such
Registrable Securities; provided, however, that if Securities are being offered
for the account of other persons or entities as well as the Company, such
reduction shall not represent a greater fraction of the number of Registrable
Securities intended to be offered by the Holders than the fraction of similar
reductions imposed on such other persons or entities (other than the Company) -
(e) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the same shall be in writing and signed by the Company, COES and the
Holders of at least two-thirds of the then outstanding Registrable Securities;
provided, however, that, for the purposes of this sentence, Registrable
Securities that are owned, directly or indirectly, by the Company, or an
Affiliate of the Company (including, but not limited to, COES) are not deemed
outstanding.
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<PAGE>
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders and that does not directly or indirectly affect the rights of other
Holders may be given by Holders of at least a majority of the Registrable
Securities to which such waiver or consent relates; provided, however, that the
provisions of this sentence may not be amended, modified, or supplemented except
in accordance with the provisions of the immediately preceding sentence.
(f) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 8:00 p.m. (Eastern Standard
Time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in the Purchase Agreement later than 7:00 p.m.
(Eastern Standard Time) on any date and earlier than 11:59 p.m. (Eastern
Standard Time) on such date, (iii) the Business Day following the date of
mailing, if sent by nationally recognized overnight courier service, or (iv)
upon actual receipt by the party to whom such notice is required to be given to
each Holder at its address set forth under its name on Schedule 1 attached
hereto or such other address as may be designated in writing hereafter, in the
same manner, by such Person. Copies of notices to any Holder shall be sent to
Robinson Silverman Pearce Aronsohn & Berman LLP, 1290 Avenue of the Americas,
New York, NY 10104, Attn: Kenneth L. Henderson, Esq., fax: (212) 541-4630 and
copies of all notices to the Company shall be sent to Greenberg Traurig Hoffman
Lipoff Rosen & Quentel, The MetLife Building, 200 Park Avenue, 15th Floor, New
York, NY 10166, Attn: Stephen A. Weiss, Esq., fax: 212-801-6400.
(g) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties
and shall inure to the benefit of each Holder. The Company may not assign its
rights or obligations hereunder without the prior written consent of each
Holder. Each Purchaser may assign its rights hereunder in the manner and to the
Persons as permitted under the Purchase Agreement.
(h) Assignment of Registration Rights. The rights of each Holder hereunder,
including the right to have the Company register for resale Registrable
Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any Affiliate of such Holder, any
other Holder or Affiliate of any other Holder and up to four other assignees of
all or a portion of the Transaction Shares if: (i) the Holder agrees in writing
with the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company within a reasonable time after such
assignment, (ii) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment the further disposition of such securities by the
transferee or assignees is restricted under the Securities Act and applicable
state securities laws, (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this Section, the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
of this Agreement, and
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<PAGE>
(v) such transfer shall have been made in accordance with the applicable
requirements of the Purchase Agreement. The rights to assignment shall apply to
the Holders (and to subsequent) successors and assigns.
(i) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
(j) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law.
(k) Cumulative Remedies. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their reasonable efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(m) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(n) Shares Held by The Company and its Affiliates. Whenever the consent or
approval of Holders of a specified percentage of Registrable Securities is
required hereunder, Registrable Securities held by the Company or its Affiliates
(other than any Holder or transferees or successors or assigns thereof if such
Holder is deemed to be an Affiliate solely by reason of its holdings of such
Registrable Securities), including, but not limited to, COES, shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE TO FOLLOW]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
COMMODORE APPLIED TECHNOLOGIES, INC.
By: /s/ Paul E. Hannesson
---------------------------------------------
Name: Paul E. Hannesson
Title: President and Chief Executive Officer
COMMODORE ENVIRONMENTAL SERVICES, INC.
By: /s/ Michael D. Fullwood
---------------------------------------------
Name: Michael D. Fullwood
Title: Senior Vice President, Chief Financial
and Administrative Officer, Secretary
and General Counsel
SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD.
By: /s/ Kenneth L. Hudson
---------------------------------------------
Name: Kenneth L. Hudson
Title: Attorney-in-fact
WESTOVER INVESTMENTS L.P.
By: /s/ William E. Rose
---------------------------------------------
Name: William E. Rose
Title: Authorized Signatory
MONTROSE INVESTMENTS, LTD.
By: /s/ William E. Rose
---------------------------------------------
Name: William E. Rose
Title: Authorized Signatory
<PAGE>
Schedule 1
Company:
Commodore Applied Technologies, Inc.
150 East 58th Street
New York, New York 10155
Attn: Bentley J. Blum and Michael D. Fullwood
Fax: (212) 753-0731
COES:
Commodore Environmental Technologies, Inc.
150 East 58th Street
New York, New York 10155
Attn: Bentley J. Blum and Michael D. Fullwood
Fax: (212) 753-0731
Purchasers:
Southbrook International Investments, Ltd.
c/o Trippoak Advisors, Inc.
630 Fifth Avenue, Suite 2000
New York, NY 10111
Attn: Robert L. Miller
Fax: (212) 332-3256
Westover Investments L.P.
777 Main Street, Suite 2750
Fort Worth, Texas 76102
Attn: Will Rose
Fax: (817) 870-6190
Montrose Investments, Ltd.
777 Main Street, Suite 2750
Fort Worth, Texas 76102
Attn: Will Rose
Fax: (817) 870-6190
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<PAGE>
ESCROW AGREEMENT
ESCROW AGREEMENT (this "Agreement"), dated as of February 9, 1998, by and
among Commodore Environmental Services, Inc. ("COES"), Commodore Applied
Technologies, Inc. (the "Company"), Southbrook International Investments, Ltd.
("Southbrook"), Montrose Investments, Ltd. ("Montrose"), Westover Investment
L.P. ("Westover") (Southbrook, Montrose and Westover are each referred to herein
as a "Purchaser" and are collectively referred to herein as the "Purchasers."),
and Robinson Silverman Pearce Aronsohn & Berman LLP (the "Escrow Agent").
Recitals
A. Simultaneously with the execution of this Agreement, COES, the Company
and the Purchasers have entered into a Common Stock Purchase Agreement, dated as
of the date hereof (the "Purchase Agreement"), pursuant to which COES is selling
to the Purchasers shares (the "Shares") of the Company's common stock, $.001 par
value (the "Common Stock") and warrants to purchase shares of Common Stock (the
"Warrants") pursuant to the First Tranche Closing and the Second Tranche
Closing, if any. Capitalized terms that are used and not otherwise defined in
this Agreement that are defined in the Purchase Agreement shall have the meaning
set forth in the Purchase Agreement.
B. The Escrow Agent is willing to act as escrow agent pursuant to the terms
of this Agreement with respect to the receipt and subsequent delivery of the
First Tranche Purchase Price to be paid for the Initial First Tranche Shares and
the First Tranche Warrants pursuant to Section 1.1 of the Purchase Agreement
less any amounts any parties are to be paid or reimbursed by COES under the
Purchase Agreement (the "First Tranche Purchase Price") and the delivery of the
Initial First Tranche Shares and the First Tranche Warrants, together with the
Ancillary First Tranche Closing Documents (as defined below) and the First
Tranche Purchase Price (the "First Tranche Consideration").
C. If there is a Second Tranche Closing, the Escrow Agent is willing to act
as escrow agent pursuant to the terms of this Agreement with respect to the
receipt and subsequent delivery of the Second Tranche Purchase Price to be paid
for the Initial Second Tranche Shares and the Second Tranche Warrants pursuant
to Section 1.1 of the Purchase Agreement less any amounts any parties are to be
paid or reimbursed by COES under the Purchase Agreement (the "Second Tranche
Purchase Price") and the delivery of the Initial Second Tranche Shares and the
Second Tranche Warrants, together with the Ancillary Second Tranche Closing
Documents (as defined below) and the Second Tranche Purchase Price (the "Second
Tranche Consideration" and together with the First Tranche Consideration, the
"Consideration").
D. Upon the First Tranche Closing and the Second Tranche Closing
(collectively, the "Closing") and the occurrence of the events described in
Sections 2 and 4
<PAGE>
below, the Escrow Agent shall cause the distribution of the First Tranche
Consideration and the Second Tranche Consideration, respectively, in accordance
with the terms of this Agreement.
NOW, THEREFORE, IT IS AGREED:
1. Deposit of Consideration for the First Tranche Closing.
a. Concurrently with the execution of this Agreement, the Purchasers shall
deposit with the Escrow Agent the First Tranche Purchase Price due for the
Initial First Tranche Shares and the First Tranche Warrants to be purchased by
them at the First Tranche Closing in accordance with Section 1.1(a)(ii) of the
Purchase Agreement and COES shall deliver to the Escrow Agent the Initial First
Tranche Shares and the First Tranche Warrants, registered in the name of the
Purchasers, and the maximum amount of Additional First Tranche Shares in
accordance with Sections 1.2(a)(ii) and (iii) of the Purchase Agreement and
wiring instructions for transfer of the First Tranche Purchase Price by the
Escrow Agent into an account specified by COES for such purpose. In addition,
the Purchasers and COES shall deposit with the Escrow Agent all other
certificates and other documents required under the Purchase Agreement to be
delivered by them at the First Tranche Closing (such certificates and other
documents being hereinafter referred to as the "Ancillary First Tranche Closing
Documents").
(i) The First Tranche Purchase Price shall be delivered by the
Purchasers to the Escrow Agent by wire transfer to the following account:
Citibank, N.A.
153 East 53rd Street
New York, NY 10043
ABA No.: 021-000-089
For the Account of
Robinson Silverman Pearce Aronsohn
& Berman LLP
Attorney Trust Account
Account No.: 37-204-162
Attention: Alexis Laurenceau
Reference: Commodore Applied Technologies, Inc. (10650-14)
(ii) The Initial First Tranche Shares, First Tranche Warrants and the
Ancillary First Tranche Documents shall be delivered to the Escrow Agent at
its address for notice indicated in Section 7(a).
b. Until termination of this Agreement as set forth in Section 2, all
additional First Tranche Consideration paid by or which becomes payable between
COES and the Purchasers shall be deposited with the Escrow Agent.
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<PAGE>
c. The Purchasers and COES understand that the First Tranche Consideration
delivered to the Escrow Agent pursuant to Section 1(a) shall be held in escrow
in the Escrow Agent's interest-bearing business account until the First Tranche
Closing. After the First Tranche Purchase Price has been received by the Escrow
Agent and all other conditions of First Tranche Closing are met, the parties
hereto hereby authorize and instruct the Escrow Agent to promptly effect the
First Tranche Closing.
d. At the First Tranche Closing, Escrow Agent is authorized and directed to
deduct from the First Tranche Purchase Price (i) $510,000 which will be paid to
Avalon Research Group, Inc. ("Avalon") in accordance with the engagement letter
between the Company and Avalon relating to the transactions contemplated by the
Purchase Agreement (the "Engagement Letter"), for remittance to Avalon in
accordance with its instructions and (ii) $20,000 which will be retained by the
Escrow Agent for its legal fees in accordance with the Purchase Agreement. In
addition, the portion of the First Tranche Purchase Price released to COES
hereunder shall be reduced by all wire transfer fees incurred thereupon.
2. Terms of Escrow for the First Tranche Closing.
a. The Escrow Agent shall hold the First Tranche Consideration in escrow
until the earlier to occur of (i) the receipt by the Escrow Agent of the First
Tranche Purchase Price, the Initial First Tranche Shares, the maximum amount of
Additional First Tranche Shares, the First Tranche Warrants and the Ancillary
First Tranche Closing Documents, and a writing signed by the Purchasers and COES
that all of the First Tranche Closing conditions have been met and instructing
the First Tranche Closing, and (ii) the receipt by the Escrow Agent of a written
notice, executed by COES or the Purchasers, stating that the Purchase Agreement
has been terminated in accordance with its terms and instructing the Escrow
Agent with respect to the First Tranche Purchase Price, the Initial First
Tranche Shares, the Additional First Tranche Shares, the First Tranche Warrants
and the Ancillary First Tranche Closing Documents.
b. If the Escrow Agent receives the items referenced in clause (i) of
Section 2(a) prior to its receipt of the notice referenced in clause (ii) of
Section 2(a), then, promptly thereafter, the Escrow Agent shall deliver (i) to
the Purchasers, the Initial First Tranche Shares, the First Tranche Warrants and
any interest earned on account of the First Tranche Purchase Price through the
First Tranche Closing, (ii) to COES, the First Tranche Purchase Price (net of
amounts described under Section 1(d)), and (iii) the Ancillary First Tranche
Closing Documents to the party entitled to receive the same.
c. If the Escrow Agent receives the notice referenced in clause (ii) of
Section 2(a) prior to its receipt of the items referenced in clause (i) of
Section 2(a), then the Escrow Agent shall promptly upon receipt of such notice
return (i) the First Tranche Purchase Price (together with any interest earned
thereon through such date) to the Purchasers, (ii) the Initial First Tranche
Shares, the Additional First Tranche Shares and the First Tranche Warrants
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<PAGE>
to COES and (iii) the Ancillary First Tranche Closing Documents to the party
that delivered the same.
d. If the Escrow Agent, prior to delivering or causing to be delivered the
First Tranche Consideration in accordance herewith, receives notice of
objection, dispute, or other assertion in accordance with any of the provisions
of this Agreement, the Escrow Agent shall continue to hold the First Tranche
Consideration until such time as the Escrow Agent shall receive (i) written
instructions jointly executed by the Purchasers and COES, directing distribution
of such First Tranche Consideration, or (ii) a certified copy of a judgment,
order or decree of a court of competent jurisdiction, final beyond the right of
appeal, directing the Escrow Agent to distribute said First Tranche
Consideration to any party hereto or as such judgment, order or decree shall
otherwise specify (including any such order directing the Escrow Agent to
deposit the First Tranche Consideration into the court rendering such order,
pending determination of any dispute between any of the parties). In addition,
the Escrow Agent shall have the right to deposit any of the First Tranche
Consideration with a court of competent jurisdiction pursuant to Section 1006 of
the New York Civil Practice Law and Rules without liability to any party if said
dispute is not resolved within 30 days of receipt of any such notice of
objection, dispute or otherwise.
3. Deposit of Consideration for the Second Tranche Closing.
a. Prior to the Second Tranche Closing Date, if any, the Purchasers shall
deposit with the Escrow Agent the Second Tranche Purchase Price due for the
Initial Second Tranche Shares and the Second Tranche Warrants to be purchased by
them at the Second Tranche Closing, if any, in accordance with Section 1.1(b) of
the Purchase Agreement and COES shall deliver to the Escrow Agent the Initial
Second Tranche Shares and the Second Tranche Warrants, registered in the name of
the Purchasers, and the maximum amounts of Additional Second Tranche Shares in
accordance with Sections 1.2(b)(ii) and (iii) of the Purchase Agreement and
wiring instructions for transfer of the Second Tranche Purchase Price by the
Escrow Agent into an account specified by COES for such purpose. In addition,
the Purchasers and COES shall deposit with the Escrow Agent all other
certificates and other documents required under the Purchase Agreement to be
delivered by them at the Second Tranche Closing (such certificates and other
documents being hereinafter referred to as the "Ancillary Second Tranche Closing
Documents").
(i) The Second Tranche Purchase Price shall be delivered by the
Purchasers to the Escrow Agent by wire transfer to the following account:
Citibank, N.A.
153 East 53rd Street
New York, NY 10043
ABA No.: 021-000-089
For the Account of
Robinson Silverman Pearce Aronsohn
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<PAGE>
& Berman LLP
Attorney Trust Account
Account No.: 37-204-162
Attention: Alexis Laurenceau
Reference: Commodore Applied Technologies, Inc. (10650-14)
(ii) The Initial Second Tranche Shares, Second Tranche Warrants and
the Ancillary Second Tranche Documents shall be delivered to the Escrow
Agent at its address for notice indicated in Section 7(a).
b. Until termination of this Agreement as set forth in Section 4, all
additional Second Tranche Consideration paid by or which becomes payable between
COES and the Purchasers shall be deposited with the Escrow Agent.
c. The Purchasers and COES understand that the Second Tranche Consideration
delivered to the Escrow Agent pursuant to Section 1(a) shall be held in escrow
in the Escrow Agent's interest-bearing business account until the Second Tranche
Closing. After the Second Tranche Purchase Price has been received by the Escrow
Agent and all other conditions of Second Tranche Closing are met, the parties
hereto hereby authorize and instruct the Escrow Agent to promptly effect the
Second Tranche Closing.
d. At the Second Tranche Closing, Escrow Agent is authorized and directed
to deduct from the Second Tranche Purchase Price, (i) 8 1/2% of the Second
Tranche Purchase Price which will be paid to Avalon in accordance with the
Engagement Letter, for remittance to Avalon in accordance with its instructions.
In addition, the portion of the Second Tranche Purchase Price released to COES
hereunder shall be reduced by all wire transfer fees incurred thereupon.
4. Terms of Escrow for the Second Tranche Closing.
a. The Escrow Agent shall hold the Second Tranche Consideration in escrow
until the earlier to occur of (i) the receipt by the Escrow Agent of the Second
Tranche Purchase Price, the Initial Second Tranche Shares, the Second Tranche
Warrants and the Ancillary Second Tranche Closing Documents and a writing signed
by the Purchasers and COES that all of the Second Tranche Closing conditions
have been met and instructing the Second Tranche Closing, and (ii) the receipt
by the Escrow Agent of a written notice, executed by COES or the Purchasers,
stating that the Purchase Agreement has been terminated in accordance with its
terms and instructing the Escrow Agent with respect to the Second Tranche
Purchase Price, the Initial Second Tranche Shares, the Second Tranche Warrants
and the Ancillary Second Tranche Closing Documents.
b. If the Escrow Agent receives the items referenced in clause (i) of
Section 4(a) prior to its receipt of the notice referenced in clause (ii) of
Section 4(a), then, promptly thereafter, the Escrow Agent shall deliver (i) to
the Purchasers, the Initial Second
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<PAGE>
Tranche Shares, the Second Tranche Warrants, any interest earned on account of
the Second Tranche Purchase Price through the Second Tranche Closing, (ii) to
COES, the Second Tranche Purchase Price (net of amounts described under Section
3(d), and (iii) the Ancillary Second Tranche Closing Documents to the party
entitled to receive the same.
c. If the Escrow Agent receives the notice referenced in clause (ii) of
Section 4(a) prior to its receipt of the items referenced in clause (i) of
Section 4(a), then the Escrow Agent shall promptly upon receipt of such notice
return (i) the Second Tranche Purchase Price (together with any interest earned
thereon through such date) to the Purchasers, (ii) the Initial Second Tranche
Shares and Second Tranche Warrants to COES and (iii) the Ancillary Second
Tranche Closing Documents to the party that delivered the same.
d. If the Escrow Agent, prior to delivering or causing to be delivered the
Second Tranche Consideration in accordance herewith, receives notice of
objection, dispute, or other assertion in accordance with any of the provisions
of this Agreement, the Escrow Agent shall continue to hold the Second Tranche
Consideration until such time as the Escrow Agent shall receive (i) written
instructions jointly executed by the Purchasers and COES, directing distribution
of such Second Tranche Consideration, or (ii) a certified copy of a judgment,
order or decree of a court of competent jurisdiction, final beyond the right of
appeal, directing the Escrow Agent to distribute said Second Tranche
Consideration to any party hereto or as such judgment, order or decree shall
otherwise specify (including any such order directing the Escrow Agent to
deposit the Second Tranche Consideration into the court rendering such order,
pending determination of any dispute between any of the parties). In addition,
the Escrow Agent shall have the right to deposit any of the Second Tranche
Consideration with a court of competent jurisdiction pursuant to Section 1006 of
the New York Civil Practice Law and Rules without liability to any party if said
dispute is not resolved within 30 days of receipt of any such notice of
objection, dispute or otherwise.
5. Duties and Obligations of the Escrow Agent.
a. The parties hereto agree that the duties and obligations of the Escrow
Agent are only such as are herein specifically provided and no other. The Escrow
Agent's duties are as a depositary only, and the Escrow Agent shall incur no
liability whatsoever, except as a direct result of its willful misconduct.
b. The Escrow Agent may consult with counsel of its choice, and shall not
be liable for any action taken, suffered or omitted by it in accordance with the
advice of such counsel.
c. The Escrow Agent shall not be bound in any way by the terms of any other
agreement to which the Purchasers, COES and the Company are parties, whether or
not it has knowledge thereof, and the Escrow Agent shall not in any way be
required to determine whether or not any other agreement has been complied with
by the Purchasers, COES and the Company, or any other party thereto. The Escrow
Agent shall not be bound by any
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<PAGE>
modification, amendment, termination, cancellation, rescission or supersession
of this Agreement unless the same shall be in writing and signed by each of the
Purchasers, COES and the Company, and agreed to in writing by the Escrow Agent.
d. In the event that the Escrow Agent shall be uncertain as to its duties
or rights hereunder or shall receive instructions, claims or demands which, in
its opinion, are in conflict with any of the provisions of this Agreement, it
shall be entitled to refrain from taking any action, other than to keep safely,
all Consideration held in escrow until it shall jointly be directed otherwise in
writing by the Purchasers, COES and the Company or by a final judgment of a
court of competent jurisdiction.
e. The Escrow Agent shall be fully protected in relying upon any written
notice, demand, certificate or document which it, in good faith, believes to be
genuine. The Escrow Agent shall not be responsible for the sufficiency or
accuracy of the form, execution, validity or genuineness of documents or
securities now or hereafter deposited hereunder, or of any endorsement thereon,
or for any lack of endorsement thereon, or for any description therein; nor
shall the Escrow Agent be responsible or liable in any respect on account of the
identity, authority or rights of the persons executing or delivering or
purporting to execute or deliver any such document, security or endorsement.
f. The Escrow Agent shall not be required to institute legal proceedings of
any kind and shall not be required to defend any legal proceedings which may be
instituted against it or in respect of the Consideration.
g. If the Escrow Agent at any time, in its sole discretion, deems it
necessary or advisable to relinquish custody of the Consideration, it may do so
by giving five (5) days written notice to the parties of its intention and
thereafter delivering the consideration to any other escrow agent mutually
agreeable to the Purchasers, COES and the Company and, if no such escrow agent
shall be selected within three days of the Escrow Agent's notification to the
Purchasers, COES and the Company of its desire to so relinquish custody of the
Consideration, then the Escrow Agent may do so by delivering the Consideration
(a) to any bank or trust company in the Borough of Manhattan, City and State of
New York, which is willing to act as escrow agent thereunder in place and
instead of the Escrow Agent, or (b) to the clerk or other proper officer of a
court of competent jurisdiction as may be permitted by law within the State,
County and City of New York. The fee of any such bank or trust company or court
officer shall be borne one-half by the Purchasers and one-half by COES. Upon
such delivery, the Escrow Agent shall be discharged from any and all
responsibility or liability with respect to the Consideration and CEO, the
Company and the Purchasers shall promptly pay to the Escrow Agent all monies
which may be owed it for its services hereunder, including, but not limited to,
reimbursement of its out-of-pocket expenses pursuant to paragraph (i) below.
h. This Agreement shall not create any fiduciary duty on the Escrow Agent's
part to the Purchasers, COES or the Company, nor disqualify the Escrow Agent
from representing either party hereto in any dispute with the other, including
any dispute with respect
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<PAGE>
to the Consideration. COES and the Company understand that the Escrow Agent has
acted and will continue to act as counsel to the Purchasers.
i. The reasonable out-of-pocket expenses paid or incurred by the Escrow
Agent in the administration of its duties hereunder, including, but not limited
to, all counsel and advisors' and agents' fees and all taxes or other
governmental charges, if any, shall be paid by COES.
j. Upon the occurrence of the First Tranche Closing, the Escrow Agent's
obligations pursuant to Sections 1 and 2 shall terminate, but shall continue
regarding Sections 3 and 4. Subsequently, if there is no Second Tranche Closing,
the Escrow Agent's obligations pursuant to Sections 3 and 4, shall terminate. If
Additional First Tranche Shares or Additional Second Tranche Shares are to be
conveyed to the Purchasers pursuant to the Purchase Agreement, Escrow Agent is
authorized to deliver such shares it is holding to counsel for COES so they can
effect such conveyance. The balance of any Additional First Tranche Shares or
Second Tranche Shares which are not conveyed in accordance with the Purchase
Agreement shall be returned by Escrow Agent to counsel for COES promptly
following the earlier to occur of the date on which Escrow Agent receives notice
from the Purchasers or COES that they will not be issued under the Purchase
Agreement or the date of termination of this Agreement.
6. Indemnification. The Purchasers, COES and the Company, jointly and
severally, hereby indemnify and hold the Escrow Agent, its employees, partners,
members and representatives harmless from and against any and all losses,
damages, taxes, liabilities and expenses that may be incurred, directly or
indirectly, by the Escrow Agent and/or any such person, arising out of or in
connection with its acceptance of appointment as the Escrow Agent hereunder
and/or the performance of its duties pursuant to this Agreement, including, but
not limited to, all legal costs and expenses of the Escrow Agent and any such
person incurred defending itself against any claim or liability in connection
with its performance hereunder and the costs of recovery of amounts pursuant to
this Section 6.
7. Miscellaneous.
a. All notices, requests, demands and other communications hereunder shall
be in writing, with copies to all the other parties hereto, and shall be deemed
to have been duly given when (i) if delivered by hand, upon receipt, (ii) if
sent by facsimile, upon receipt of proof of sending thereof, (iii) if sent by
nationally recognized overnight delivery service (receipt requested), the next
business day or (iv) if mailed by first-class registered or certified mail,
return receipt requested, postage prepaid, four days after posting in the U.S.
mails, in each case if delivered to the following addresses:
If to the Company: Commodore Applied Technologies, Inc.
150 East 58th Street
New York, NY 10155
Facsimile No.: (212) 753-0731
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<PAGE>
Attn: Chief Financial Officer
With copies to: Greenberg Traurig
200 Park Avenue
New York, NY 10166
Facsimile No.: (212) 801-6400
Attn: Stephen Weiss, Esq.
If to the Purchasers: Southbrook International Investments, Ltd.
c/o Trippoak Advisors, Inc.
630 Fifth Avenue, Suite 2000
New York, NY 10111
Attn: Robert L. Miller
Fax: (212) 332-3256
Westover Investments L.P.
777 Main Street, Suite 2750
Fort Worth, Texas 76102
Attn: Will Rose
Fax: (817) 870-6190
Montrose Investments, Ltd.
777 Main Street, Suite 2750
Fort Worth, Texas 76102
Attn: Will Rose
Fax: (817) 870-6190
If to the Escrow Agent Robinson Silverman Pearce Aronsohn &
(the Escrow Agent shall Berman LLP
receive copies of all 1290 Avenue of the Americas
communications under New York, NY 10104
this Agreement) Facsimile No.: (212) 541-4630
Attn: Eric L. Cohen, Esq.
or at such other address as any of the parties to this Agreement may hereafter
designate in the manner set forth above to the others.
(b) This Agreement shall be construed and enforced in accordance with the
law of the State of New York applicable to contracts entered into and performed
entirely within New York.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to
be signed the day and year first above written.
COMMODORE APPLIED TECHNOLOGIES, INC.
By: /s/ Paul E. Hannesson
---------------------------------------------
Name: Paul E. Hannesson
Title: President and Chief Executive Officer
COMMODORE ENVIRONMENTAL SERVICES, INC.
By: /s/ Michael D. Fullwood
---------------------------------------------
Name: Michael D. Fullwood
Title: Senior Vice President, Chief Financial
and Administrative Officer, Secretary
and General Counsel
SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD.
By: /s/ Kenneth L. Hudson
---------------------------------------------
Name: Kenneth L. Hudson
Title: Attorney-in-fact
WESTOVER INVESTMENTS L.P.
By: /s/ William E. Rose
---------------------------------------------
Name: William E. Rose
Title: Authorized Signatory
MONTROSE INVESTMENTS, LTD.
By: /s/ William E. Rose
---------------------------------------------
Name: William E. Rose
Title: Authorized Signatory
ROBINSON SILVERMAN PEARCE
ARONSOHN & BERMAN LLP
BY: /s/
-----------------------------------------------
A Member of the Firm
<PAGE>
PROMISSORY NOTE
Dated: February 10, 1998
$5,450,000
New York, New York
FOR VALUE RECEIVED, the undersigned, COMMODORE APPLIED TECHNOLOGIES, INC.,
a Delaware corporation ("Maker"), promises to pay to COMMODORE ENVIRONMENTAL
SERVICES, INC., a Delaware corporation ("Payee"), at the principal executive
offices of Payee, 150 East 58th Street, Suite 3400, New York, New York 10151, or
at such commercial bank within the United States of America as Payee may
designate to Maker from time to time, in lawful money of the United States of
America and in immediately available funds, the principal sum of Five Million
Four Hundred and Fifty Thousand Dollars ($5,450,000). Maker agrees to pay
interest in like money at such office or commercial bank on the unpaid aggregate
principal amount hereof at a rate equal to eight percent (8%) per annum.
1. Principal and interest shall be due and payable in the manner set forth
below:
(a) Accrued interest on the unpaid principal amount hereof shall be
paid semiannually in cash.
(b) Maker will pay, in whole or in part, the principal balance then
outstanding of this Note, together with accrued interest, on or within five
(5) days after each date that the Maker shall receive cash proceeds (net of
offering expenses) from the issuance of any notes, bonds, debentures,
evidence of indebtedness, shares of capital stock or any other securities
in any one or more public offerings or private placements of such
securities aggregating in excess of $6.0 million, other than in respect of
working capital financing or secured financing of assets received by the
Maker in the ordinary course of business from any bank or other lending
institution, the activities of which are regulated by applicable federal or
state banking laws.
(c) Unless otherwise paid in full pursuant to Paragraph 1(b) above,
Maker will pay the entire principal balance then outstanding of this Note,
together with accrued interest, in cash, on December 31, 1999.
(d) All payments (including prepayments) made hereunder shall be
applied first to the payment of accrued and unpaid interest, with the
balance remaining applied to the payment of the unpaid principal balance of
this Note.
<PAGE>
(e) This Note may, at the option of Maker, be prepaid at any time in
whole or in part, without premium or penalty.
2. Notwithstanding any provision to the contrary contained in this Note, it
is expressly agreed that the entire principal amount outstanding at any time
under this Note, and all accrued and unpaid interest, shall immediately become
due and payable (without demand for payment, notice of non-payment, presentment,
notice of dishonor, protest, notice of protest or any other notice, all of which
are hereby expressly waived by Maker):
(a) upon the default in the payment of any interest or principal due
under this Note, which default continues uncured for a period of ten (10)
days;
(b) if Maker shall make an assignment for the benefit of creditors; or
shall admit in writing its inability to pay its debts; or if a receiver or
trustee shall be appointed for Maker or for substantially all of its assets
and, if appointed without its consent, such appointment is not discharged
or stayed within thirty (30) days; or if proceedings under any law relating
to bankruptcy, insolvency or the reorganization or relief of debtors are
instituted by or against the Maker and, if contested by it, are not
dismissed or stayed within thirty (30) days; or if any writ of attachment
or execution or any similar process is issued or levied against Maker or
any significant part of its property and is not released, stayed, bonded or
vacated within thirty (30) days after its issue or levy; or if Maker takes
corporate action in furtherance of any of the foregoing;
(c) after a "Change in Control," which shall be deemed to have
occurred when (a) a third person, including a "group," as such term is
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, other
than Payee or its affiliates, becomes (other than as a result of a purchase
from Maker) the beneficial owner of shares of Maker having 10% or more of
the total number of votes that may be cast for the election of directors of
Maker and such beneficial owner continues for five consecutive days, or (b)
as a result of, or in connection with, any cash tender or exchange offer,
merger or other business combination, sale of assets or contested election
or any combination of the foregoing transactions, the persons who were
directors of Maker before such transaction shall cease for any reason to
constitute at least a majority of the Board of Directors of Maker or any
successor; or
(d) any event of default which results in the acceleration of
indebtedness of Maker to any other person under any note, indenture,
agreement or undertaking and that is not cured within thirty (30) days
(each, an "Event of Default").
3. All notices, requests and demands to or upon Maker or Payee to be
effective shall be in writing and shall be deemed to have been duly given or
made when delivered by hand, or when sent by certified mail, postage prepaid,
addressed as follows or to such other address as may hereafter be notified by
the respective parties hereto:
Maker: Commodore Applied Technologies, Inc.
150 East 58th Street, Suite 3400
New York, New York 10151
2
<PAGE>
Attn: Mr. Paul E. Hannesson, President
and Chief Executive Officer
Payee: Commodore Environmental Services, Inc.
150 East 58th Street, Suite 3400
New York, New York 10151
Attn: Mr. Paul E. Hannesson, President
and Chief Executive Officer
4. No failure or delay on the part of Payee in exercising any of its
rights, powers or privileges hereunder shall operate as a waiver thereof, nor
shall a single or partial exercise thereof preclude any other or further
exercise of any right, power or privilege. Maker hereby waives demand for
payment, notice of non-payment, presentment, notice of dishonor, protest, notice
of protest or any other notice in connection with the delivery, acceptance,
performance or enforcement of this Note.
5. This Note may not be changed or terminated orally, nor may any of its
provisions be waived, except by an agreement in writing signed by the party
against whom enforcement of such change or termination is sought.
6. In case any one or more Events of Default shall occur and be continuing,
Payee may proceed to protect and enforce its rights by an action at law, suit in
equity or other appropriate proceeding. Maker shall pay all reasonable costs of
collection when incurred, including reasonable attorneys' fees.
7. This Note shall be governed by and construed in accordance with the laws
of the State of New York, without giving effect to its choice of law rules.
IN WITNESS WHEREOF, the Maker has executed this Promissory Note as of the
date first above written.
COMMODORE APPLIED TECHNOLOGIES, INC.
By: /s/ Michael D. Fullwood
----------------------------------
Name: Michael D. Fullwood
Title: SVP, CFO, GC
3
